Don’t Worry, Be Happy – 2018 Forecast

The new year reminds economists to look into their crystal balls once again. Below is a sample of mainstream economic forecasts for 2018. We are entering the 9^th year of a bull market, and stocks recently hit a record high. That makes some people nervous. But the 2018 theme song of these economists seems to be:
Don’t Worry, Be Happy.

• “…the economic expansion is increasingly broad based across sectors as well as across much of the global economy. I expect that, with gradual adjustments in the stance of monetary policy, the economy will continue to expand and the job market will strengthen somewhat further, supporting faster growth in wages and incomes.”
  (Janet Yellen, 11/29/17)

• “We expect global economic growth to chug along in 2018, but see less room for upside surprises to lift markets…. Market exuberance appears far from ubiquitous. Our risk gauge suggests there is room for investors to embrace more risk…. We believe investors are underestimating the durability of this expansion.”
  (BlackRock 2018 Global Investment Outlook)

• “For the first time since 2010, the world economy is outperforming most predictions, and we expect this strength to continue. Out global GDP forecast for 2018 is 4.0%, up from 3.7% in 2017 and meaningfully above consensus. The strength in global growth is broad-based across most advanced and emerging economies.”
  (Goldman Sachs 2018 Global Economic Outlook)

• “Periods of high economic growth often sow the seeds of their own demise. But we believe there is little evidence today of an impending recession. Historically, downturns have been caused individually or in tandem by oil price shocks, too-tight monetary policy, contractions in government spending, or financial/credit crises. None look likely to materialize in 2018.”
  (UBS House View Year Ahead 2018)

• “Looking forward, the economists surveyed in recent days had high hopes for 2018. On average, the forecasters predicted GDP would expand a healthy 2.7% this year…. The probability of a recession in the next 12 months ticked down in January to 13%, the lowest average since September 2015. More than two-thirds of forecasters said they saw the risks to the growth outlook as tilted to the upside.”
  (Wall Street Journal Economic Forecasting Survey, 1/11/18)

• “The U.S. economy is now in the 9^th year of its current expansion, and at this point there is little reason to believe that it will end in 2018. In fact, this expansion will likely end up being the longest in U.S. history.”
  (Beacon Economics forecast, Winter 2018)

Nick West
Vice President
nickw@slatt.com