By Shane Oliver, Head of Investment Strategy & Chief Economist from Oliver’s Insights, AMP Capital, 6 December 2017
- The “sweet spot” combination of solid global growth and profits and yet low inflation and benign central banks is likely to continue in 2018. However, US inflation is likely to start to stir and the Fed is likely to get a bit more aggressive. Expect a gradual rise in bond yields and a rising US dollar. The RBA is unlikely to start hiking rates until late 2018 at the earliest.
- Most growth assets are likely to trend higher, but expect more volatility and more constrained returns. Australian shares are likely to remain laggards.
- The main things to keep an eye on are: the risks around Trump; inflation, the Fed and the $US; bond yields; the Italian election; China; and Australian property prices.
- Despite the usual worry list, 2017 has been pretty good for investors as global growth and profits accelerated and central banks stayed benign as inflation stayed low.