/institutional/perspectives/macroeconomic-research/10-macro-themes-to-watch-in-2018

10 Macro Themes to Watch in 2018

Ten charts illustrate the macroeconomic trends most likely to shape Fed policy and investment performance in 2018 and beyond.

January 16, 2018


Highlights

Scott Minerd, Chairman of Investments and Global CIO, and Guggenheim’s Macroeconomic and Investment Research Group analyze in 10 annotated charts the global macroeconomic trends most likely to shape Federal Reserve (Fed) monetary policy and investment performance in 2018, and set the stage for recession in late 2019/2020.


Video

Global CIO Scott Minerd discusses the challenges of managing in a market melt up and highlights several charts from his recent piece, “10 Macro Themes to Watch in 2018.”


 
  • Stocks will rise in 2018, but by the end of the year investors should look for signs of late-cycle imbalances and begin to position more defensively. Historically, the S&P 500 has rallied by 16 percent, on average, in the penultimate year before a recession, before turning lower.
  • Tax reform will provide a 0.2 to 0.5 percent boost to real gross domestic product, but it may not save the GOP’s majority in the House of Representatives.
  • With job growth likely to continue to run above the sustainable rate of labor force growth, we expect unemployment to fall to 3.5 percent by end-2018, its lowest rate since 1969, meaningfully below the Fed’s forecast of 3.9 percent, and wage growth will accelerate.
  • Growth has rebounded in 2017, and we expect that it will accelerate further in 2018. As such, core inflation should return close to the Fed’s 2 percent target by the end of 2018.
  • Since the Fed will overshoot its employment mandate, it will deliver four rate hikes in 2018 to cool the overheating economy and labor market.
  • While our 2018 economic outlook is positive, we are heading into the late stages of the business cycle. Our analysis suggests the next recession will occur by the end of 2019 or early 2020.
  • Given current tight credit spreads, investors are not being compensated for the buildup in credit risk that will be exposed in the years ahead.
Important Notices and Disclosures

Guggenheim Investments represents the following affiliated investment management businesses of Guggenheim Partners, LLC: Guggenheim Partners Investment Management, LLC, Security Investors, LLC, Guggenheim Funds Investment Advisors, LLC, Guggenheim Funds Distributors, LLC, Guggenheim Real Estate, LLC, GS GAMMA Advisors, LLC, Guggenheim Partners Europe Limited and Guggenheim Partners India Management. This material is intended to inform you of services available through Guggenheim Investments’ affiliate businesses.

This material is distributed or presented for informational or educational purposes only and should not be considered a recommendation of any particular security, strategy or investment product, or as investing advice of any kind. This material is not provided in a fiduciary capacity, may not be relied upon for or in connection with the making of investment decisions, and does not constitute a solicitation of an offer to buy or sell securities. The content contained herein is not intended to be and should not be construed as legal or tax advice and/or a legal opinion. Always consult a financial, tax and/or legal professional regarding your specific situation.

This material contains opinions of the author or speaker, but not necessarily those of Guggenheim Partners, LLC or its subsidiaries. The opinions contained herein are subject to change without notice. Forward looking statements, estimates, and certain information contained herein are based upon proprietary and non-proprietary research and other sources. Information contained herein has been obtained from sources believed to be reliable, but are not assured as to accuracy. Past performance is not indicative of future results. There is neither representation nor warranty as to the current accuracy of, nor liability for, decisions based on such information. No part of this material may be reproduced or referred to in any form, without express written permission of Guggenheim Partners, LLC.

Forward Looking Statements. This discussion material contains forward-looking statements, which give current expectations of market activities and market performance. Any or all forward-looking statements in this material may turn out to be incorrect. They can be affected by inaccurate assumptions or by known or unknown risks and uncertainties. Although the assumptions underlying the forward-looking statements contained herein are believed to be reasonable, any of the assumptions could be inaccurate and, therefore, there can be no assurances that the forward-looking statements included in this discussion material will prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation that the objectives and plans discussed herein will be achieved. Further, no person undertakes any obligation to revise such forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

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FEATURED PERSPECTIVES

November 19, 2018

Jogging to the Exits

Preparing for the market turbulence that typically occurs in the run up to a recession.

October 29, 2018

Forecasting the Next Recession: The Yield Curve Doesn’t Lie

Our Recession Probability Model and Recession Dashboard continue to suggest a recession is likely to begin in early 2020. Investors ignore the yield curve’s signal at their peril.

October 15, 2018

Beneath the Tide of Rising Earnings

Factors that have contributed to strong earnings growth this year will fade in 2019 and turn into headwinds in 2020, exposing leveraged corporate borrowers.


VIDEO

Forecasting the Next Recession 

Forecasting the Next Recession

Global CIO Scott Minerd and Head of Macroeconomic and Investment Research Brian Smedley provide context and commentary to complement our recent publication, “Forecasting the Next Recession.”

Macro Themes to Watch in 2018 

Macro Themes to Watch in 2018

In his market outlook, Global CIO Scott Minerd discusses the challenges of managing in a market melt up and highlights several charts from his recent piece, “10 Macro Themes to Watch in 2018.”







© Guggenheim Investments. All rights reserved.

Guggenheim Investments represents the following affiliated investment management businesses of Guggenheim Partners, LLC: Guggenheim Partners Investment Management, LLC, Security Investors, LLC, Guggenheim Funds Investment Advisors, LLC, Guggenheim Funds Distributors, LLC, Guggenheim Real Estate, LLC, GS GAMMA Advisors, LLC, Guggenheim Partners Europe Limited and Guggenheim Partners India Management.