Forecast: BULLISH

The Federal Reserve is expected to raise interest rates 3 times in 2018. The first hike is scheduled for March. The most important factor that the markets will be paying attention to is whether core inflation starts to push higher.

As US unemployment drops to record lows of 4.1%. Wages are expected to increase as business start to compete for the remaining unemployed talent. Higher wages will increase spending and push up inflation. Business will raise their prices to offset the cost of paying higher wages and force the FED to follow through with their interest rate hike plans.

An important factor to pay attention to is Trump’s tax cuts. Higher take home pay for workers and increased corporate profits will increase spending and GDP Growth. This will force the FED to raise interest rates even higher than initially planned. Some investment banks have predicted 4 interest rate hikes from the FED this year.

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