Private Client Group

January 22nd, 2018

4 Insights that Might Shape the Market in 2018

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While the government faces a looming shutdown, Apple plans to invest $30 billion in the U.S. economy as well as add 20,000 new jobs. How might these and other stories affect the U.S. economy? Read on to find out…

Government Shutdown Looming? Temporary government funding runs dry at 12:01 a.m. Saturday morning, and lawmakers in Washington D.C. appear as if they have gotten further – not closer – to striking a deal to keep the government open. At the heart of the impasse is immigration, where Democrats are pushing for a deal on “Dreamers,” and Republicans want to include broader measures on border security, with President Trump still angling for a wall. A comprehensive deal seems out of reach, so what we are likely to see, in our opinion, is a stopgap bill to temporarily fund the government for another month or so. The notion of a government shutdown sounds scary and undesirable, but in reality, it’s a more common occurrence than most might think.  Since 1976, when the current budget and appropriations process was enacted, there have been 18 gaps in budget funding, seven of which resulted in temporary ‘time off’ for some federal employees. These shutdowns rarely lasted more than a few days and did not result in any meaningful impact to GDP. This go-around should not either (according to Bloomberg).

China Grows More than Expected – China reported 2017 GDP growth of 6.9%, which nicely outpaced it’s full-year target of 6.5%. In our view, 2018 could be a year where China poses a greater risk to broad-based global economic growth, and weak data out of China over the course of the year could be a catalyst for short-term volatility. It appears to us that China is poised to shift to less growth-friendly policies, as they rebalance away from growth and towards addressing imbalances, particularly debt levels – which stand at 253% of GDP as of the end of 2017. Indeed, among the goals for Beijing this year are curbing risky lending practices into investment in buildings, infrastructure and factory goods. As China undergoes these material shifts, the Trump Administration is also eyeing tougher trade terms and perhaps even fining China over abuses related to intellectual property. Should something even resembling a trade war ensue, the impact of global GDP growth in 2018 could be significant. China is among the top risks to watch in 2018 (according to Bloomberg).

Apple, Inc. Doubles Down on U.S. Economy – Apple announced this week that, as a result of statutes in the new tax bill, it plans on paying a one-time tax of $38B on its overseas cash holdings and will hire an additional 20,000 U.S. workers in the coming years. In terms of capex, Apple is also pledging big money, having indicated its plans to invest $30 billion in the U.S. economy, which includes spending on a new campus, data centers across the country, and a large investment in its Advanced Manufacturing Fund (according to Bloomberg).

Advertising Dollars in Sports – With the Super Bowl and the Winter Olympics just around the corner, it also means that advertisers are lining up to pledge big bucks on ads. For the Super Bowl, which is being carried by NBC, it is charging more than $5 million for the average 30-second spot. All of the available inventory for ads is nearly sold out. But, the dollars keep on flowing, because NBC also has the Winter Olympics, which it expects to generate more than $900 million in advertising dollars. In all, the combination of the games should generate $1.4 billion (according to Seeking Alpha).

Even with these insights, it’s hard to predict exactly what events will shape the course of the market in 2018…but you can try to prepare for it.

To help you do so, check out our stock market outlook report. Click on the link below to get your free copy today:

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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss.

Zacks Investment Management, Inc. is a wholly-owned subsidiary of Zacks Investment Research. Zacks Investment Management is an independent Registered Investment Advisory firm and acts as an investment manager for individuals and institutions. Zacks Investment Research is a provider of earnings data and other financial data to institutions and to individuals.

This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. Do not act or rely upon the information and advice given in this publication without seeking the services of competent and professional legal, tax, or accounting counsel. The information contained herein has been obtained from sources believed to be reliable but we do not guarantee accuracy or completeness. Publication and distribution of this article is not intended to create, and the information contained herein does not constitute, an attorney-client relationship. No recommendation or advice is being given as to whether any investment or strategy is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole.

Any projections, targets, or estimates in this report are forward looking statements and are based on the firm’s research, analysis, and assumptions. Due to rapidly changing market conditions and the complexity of investment decisions, supplemental information and other sources may be required to make informed investment decisions based on your individual investment objectives and suitability specifications. All expressions of opinions are subject to change without notice. Clients should seek financial advice regarding the appropriateness of investing in any security or investment strategy discussed in this presentation.

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