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Financial Experts Make 5 Predictions For 2018

It’s that time of year when financial experts are asked to dust off their crystal balls and tea leaves and offer up their predictions for the economy in 2018. At Yahoo Finance, David Nelson warns that the problem with these predictions is that experts tend to extrapolate, i.e., believing a healthy market will continue to be healthy, and vice versa. That said, he admits he falls “into that same camp as many extrapolating 2017 a very good year into the next. … Strength in overseas markets means our customers are doing well and that’s great news for US multinationals.” We round up five predictions from Fortune and WalletHub, which notes its last six years of predictions have been relatively prescient, with an average GPA of 3.56.

  • GDP growth can’t get to Trump’s 6%—or even 3%: The former figure is one President Trump suggested could happen in the wake of tax reform, per WalletHub, but both that site and Fortune expect things to remain in line with what the Fed is predicting for 2018: 2.5% year-over-year growth. That’s what’s projected for 2017, which is up from 1.6% in 2016.

  • Three rate hikes from the Fed, with consequences: The federal funds rate hasn’t been above 2% since the 2008 financial crisis, and that’ll change in 2018, with experts predicting three rate hikes that’ll put the end-of-year rate at 2.25%. WalletHub notes each quarter-point increase translates into an estimated extra $1.4 billion in credit card interest each year; it also reports delinquency rates are climbing: “A third rate hike in 2018 could be the straw that breaks the camel’s back.”

 

  • Unemployment rates last seen in the late 1960s: We were at 4.1% in November, and the Fed expects us to get to 3.9% next year. WalletHub heard much the same from its experts, with one saying 3.5%—and the lowest unemployment rate since 1969—is possible.

 

  • US IPO increase: Fortune notes that 2016 wasn’t anything to write home about in terms of “domestic IPO proceeds,” which came in at $16.2 billion. That’s expected to more than double to a hair under $40 billion this year. But with another strong year for stocks expected (see No. 5), it quotes one prediction for 2018: $70.9 billion.

 

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  • The S&P 500 will end the year up 6%: WalletHub reports that the Dec. 15 close of 2,676 puts the S&P 500 up nearly 20% for the year, but experts think the potential combination of tax reform, relatively low interest rates, robust corporate earnings, and low bond prices have the potential to send it above 2,900, with eight big banks targeting an average close for 2018 of 2,838.

Read all the predictions from WalletHub here and Fortune here.

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