Q1: WHY US INTEREST RATES HIKES ARE IMPORTANT

The US Federal Reserve’s first meeting (31 Jan) and the International Monetary Fund’s (IMF) economic outlook in the first quarter of 2018 should offer some insight into what investors can expect in the remainder of the year.

Through 2018, several US interest rate rises are anticipated, although a change in chairman from Janet Yellen to Jerome Powell (still awaiting confirmation as we write) makes the course of US monetary policy slightly less predictable.

The IMF’s outlook in October was gloomy on the UK’s future growth, pencilling in a mere 1.5% next year as the effects of Brexit are felt through inflation and stagnant wages.

If UK forecasts are more optimistic when updates are published in April then this could improve confidence and drive sterling higher.

Q2: COULD LABOUR SEIZE POWER NEXT YEAR?

The UK General Election in June saw a big comeback for the Labour Party and that could be supported by the outcome of local elections in May (3 May ‘18).

Analysts have not ruled out another national poll in 2018 and Labour’s nationalisation policies could affect utility, transportation, telecommunications and postal services companies. Spending could shift from outsourcing businesses and the the minimum wage could be hiked, placing pressure on retailers with low profit margins.

Another key event is the meeting of oil producers’ cartel in June (22 Jun ‘18) where a production cut until the end of 2018 will be reviewed, if extended further it could boost oil prices.

Q3: WILL US BULL MARKET CONTINUE INTO 2018?

If US equities continue to enjoy a strong performance until July, it will be the longest running bull market in history. This is a possibility as some observers still see valuations as fairly priced in a strong economy characterised by low unemployment, rising interest rates and strong corporate earnings.

Q4: POTENTIAL VOLATILITY AS BREXIT TALKS SET TO CLOSE

In the last quarter of 2018, the European Union expects Brexit talks to be wrapped up to allow any deals to be confirmed before the UK’s exit in 2019. There could be considerable volatility in sterling and the stock markets if Prime Minister Theresa May cannot seal desirable terms on trade and financial services.

In the US, the mid-term elections (6 Nov ‘18) will determine whether the Republicans maintain their stronghold in the House of Representatives and the Senate.  If the Republicans lose control, this would make it harder for President Donald Trump to pass legislation. (LMJ)

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