Conclusive earnings growth, which has driven stocks all year, should resume into 2018, setting up another good year for the stock trade in, said Jeffrey Kleintop, chief global investment strategist at Charles Schwab.
In an talk with with Business Insider, the executive at The Charles Schwab Corporation (SCHW) rumoured that 2018 will mark the first time in which there are back-to-back years of dame global economic growth in more than a decade. “Every one of the era’s 45 largest economies is going to grow next year, which means patronize earnings growth,” said Kleintop, noting that strong earnings expansion throughout 2017 was the secret to the rise in stocks. He did caution that, with profit curves starting to flatten out, there is a chance of a recession in 2019.
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As for risks in 2018, Kleintop barbed to a slowdown in economic growth in China that could shock the catch of the world, as well as natural disasters and geopolitical issues that may power stocks. None of those things affected stocks in 2017, with investors shrugging off any non-investment press release.
Liz Ann Sonders, senior vice president and chief investment strategist at Schwab, did apprise in a recent blog post that buying on the rumor and selling on the story could be in vogue next year. “We believe we remain in a secular bull peddle and the runway between now and real trouble for either stocks or the economy cadavers relatively long,” wrote Sonders in a blog post. “However, for reasons tabulating the possibility of a ‘buy on the rumor, sell on the news’ period around the likely constitutionalization of tax reform – and the possibility it doesn’t boost earnings growth significantly – some kills along the runway should be expected.”
For 2018, Kleintop said that one of the maximum effort ways to play the markets is for investors to “go global” but be diversified in their investments. In the prior, investors would look to a particular sector or country when providing outside the U.S., but with the correlations between how countries behave relative to each other down for the cardinal time in 20 years, investors have to be broad based in their investment realm of possibilities.
As for tech stocks, which already have lofty valuations, Kleintop said there is innumerable room for growth next year, but it may be focused on corporate technology measure than consumer technology thanks to the tax reform bill, which terminates the corporate tax rate to 21%. Given the potential for more businesses shell out, tech companies that cater to the corporate market stand to forward, he said, noting that valuations are not as high on that side of tech.