investment fundamentals good for 2018 — but beware the ‘fangs’
Last Updated : GMT 09:40:38
Themuslimchronicle, themuslimchronicle
Themuslimchronicle, themuslimchronicle
Last Updated : GMT 09:40:38
Themuslimchronicle, themuslimchronicle

Investment fundamentals good for 2018 — but beware the ‘FANGs’

Themuslimchronicle, themuslimchronicle

investment fundamentals good for 2018 — but beware the ‘fangs’

Frank Kane

Financial markets enter 2018 against a generally benign background of rising asset valuations, accelerating economic growth, and rebounding levels of world trade. But the potential for non-economic or financial factors to upset this global “goldilocks” scenario has never been greater.
Equity markets enjoyed a record year in 2017, with all the major indices in high-teens or low-20s percentage growth patterns; real estate was on an upward trajectory globally; commodities like oil and metals enjoyed a recovery.
In terms of economic growth, for once the world experienced a more-or-less coordinated recovery. When the US, Europe and China all move upward together — even at different rates — it can only be good. Trade levels, as measured by the shipping indices, hit a four-year high.
Stability in financial markets was also at an all-time high. Despite the ongoing unpredictability of politics in the US, Brexit-wary Europe, the Middle East and some parts of Asia, the VIX index — which measures the markets’ perceptions of volatility — was at its lowest in the three decades since it was devised.
There are some near-certainties about the coming year, but they are not all reassuring. One is that central banks in the US and Europe will finally begin to ween their economies off the drug of quantitative easing (QE) that they have grown dependent on since the global financial crisis in 2009.
QE — which principally involves the buying of bonds by the state financial authorities — has been a such a permanent feature of financial life for the past decade that its removal will have to be managed very carefully to avoid a collapse in financial asset prices.
This is especially true in the technology sector, where valuations are at stratospheric levels. Some experts are beginning to talk about the “fear of FANGs” — meaning the risk of investing further into the tech market-leaders Facebook, Apple, Netflix and Google. Given the fact that these companies are now among the biggest in the world and a major component of equity indices, it is a justified fear.
The flip side to the ending of QE is likely to be rising interest rates, with the US Federal Reserve setting the global tone as ever. Some experts predict four rate rises by the Fed this year, sucking out of equity markets the liquidity that has fueled the long bull run.
In the world’s biggest market, the US, this loss of liquidity, in theory, will be replaced by the stimulus of President Donald Trump’s tax cuts, but that involves a calculation that the foregone tax will be spent on investment and jobs, rather than bumper dividends, extravagant takeovers and executive bonuses. No such calculation is possible in Trump’s America.
It is the sheer unpredictability of the US that could dash the benign economic and financial outlook. What effect on markets will there be from mid-term elections, continuing FBI investigations and (possible) impeachment proceedings? It is almost impossible to say, but it’s a safe prediction that the VIX index will be more active in 2018. North Korea alone could cause a sharp spike in volatility and a corresponding drop in markets.
Against this uncertainty, the emerging market (EM) outlook looks boringly stable. China, the great driver of the Asian hemisphere (although India is increasingly doing its bit) looks set to enjoy gross domestic product (GDP) growth approaching 7 percent. This also drives world trade from the great Chinese manufacturing centers.
The big threat to all this comes — again — from the US. The Trump presidency has declared time and again that it sees China as a dumper of manufactured products and a manipulator of currencies, and is inching toward some kind of tariffs against the world’s biggest exporter. A full-blown trade war could knock aside all those forecasts of healthy global growth.
None of this would be good for the Middle East, as a great trading crossroads and the major global supplier of energy. Saudi Arabia looks set to join the EM club next summer when it will (probably) enter the MSCI indices, so any hit to EM valuations will affect the Kingdom more than ever, just as it is beginning to spend its way out of the “austerity” polices of the past three years.
For the Middle East, the economic outlook is better for 2018 than it has been for some years. Rising oil prices and trade levels add up to substantial rises in GDP growth for most countries in the region.
But again, uncertainty and volatility are the main threats. Conflict and confrontation in Iran, Qatar and Yemen, with seemingly permanent tensions in Iraq, Syria and Palestine, could all explode into market-damaging chaos. The region almost deserves a VIX index of it own.
On New Year’s Day, the fundamentals look good. But there is also much that could go wrong in global financial markets. Proceed with caution in 2018.

 

Name *

E-mail *

Comment Title*

Comment *

: Characters Left

Mandatory *

Terms of use

Publishing Terms: Not to offend the author, or to persons or sanctities or attacking religions or divine self. And stay away from sectarian and racial incitement and insults.

I agree with the Terms of Use

Security Code*

investment fundamentals good for 2018 — but beware the ‘fangs’ investment fundamentals good for 2018 — but beware the ‘fangs’

 



Themuslimchronicle, themuslimchronicle
Themuslimchronicle, themuslimchronicle
Themuslimchronicle, themuslimchronicle

GMT 06:40 2017 Saturday ,16 December

Walker needs brains not just brawn

GMT 08:15 2017 Thursday ,07 September

US oil giant ExxonMobil plans Cyprus gas exploration

GMT 18:11 2011 Monday ,18 April

Zimbabwe and Zambia in tug of war over Vic Falls

GMT 16:05 2017 Tuesday ,31 October

Qadih calls for involving private sector

GMT 09:20 2017 Wednesday ,15 November

Qualcomm spurns $130 bn Broadcom bid for big tech tie-up

GMT 13:43 2017 Tuesday ,24 October

Stabbed Russian journalist 'in recovery'

GMT 10:26 2017 Friday ,14 April

Sock topples Haas to reach ATP Houston quarters

GMT 14:00 2017 Saturday ,25 November

Sudan condemns terrorist attack in Egypt

GMT 09:40 2017 Monday ,04 December

Stade down Racing, Clermont edge plucky Agen

GMT 08:08 2017 Thursday ,05 October

Injury jinx strikes again as Iordache exits

GMT 11:20 2017 Tuesday ,05 December

Prodigal son: Saleh Saudi overture tips Yemen balance

GMT 09:35 2013 Saturday ,31 August

Afghan suicide attack kills 6, hurts 20 in south

GMT 23:36 2016 Sunday ,11 December

Suicide attack in Istanbul claims 29 lives

GMT 18:29 2013 Sunday ,10 November

Samsung\'s Galaxy Note 3 top 5m

GMT 14:52 2013 Sunday ,24 November

Computer game opponents begin to think, feel alike
Themuslimchronicle, themuslimchronicle
Themuslimchronicle, themuslimchronicle
 
 Themuslimchronicle Facebook,themuslimchronicle facebook  Themuslimchronicle Twitter,themuslimchronicle twitter Themuslimchronicle Rss,themuslimchronicle rss  Themuslimchronicle Youtube,themuslimchronicle youtube  Themuslimchronicle Youtube,themuslimchronicle youtube

Maintained and developed by Arabs Today Group SAL.
All rights reserved to Arab Today Media Group 2023 ©

Maintained and developed by Arabs Today Group SAL.
All rights reserved to Arab Today Media Group 2023 ©

muslimchronicle muslimchronicle muslimchronicle muslimchronicle
themuslimchronicle themuslimchronicle themuslimchronicle
themuslimchronicle
بناية النخيل - رأس النبع _ خلف السفارة الفرنسية _بيروت - لبنان
themuslimchronicle, themuslimchronicle, themuslimchronicle