Key US Economic & Financial Issues in 2018
Equity markets are increasingly embracing an end to the Great Disconnect, whereby improving global economic fundamentals underpin rising prices as opposed to accommodative monetary policy.
The Fed is likely to continue to raise the federal funds rate after any inversion of the yield curve if the economy remains in its current buoyant mode.
The passage of tax reform has put fiscal policy conduct firmly on the Fed’s radar screen, thereby raising the prospect of the Federal Open Market Committee (FOMC) having to embrace more hawkish forward guidance.
The Fed will monitor the risks of financial and macroeconomic instability emerging should US equity prices continue to rise sharply, particularly if use of higher leverage becomes evident.
Further increases in equity prices, due to strong retail investor inflows, without support from corporate profits could produce significant valuation erosion in 2018, somewhat similar to the events in 1998 during the information technology bubble.
Synchronised global economic growth raises the spectre of higher government bond yields that could potentially crowd out private sector investment.
DeSaque Macro Research Limited was formed by Said DeSaque in April 2012 with the intention of delivering independent global macro investment insights and new thematic long-term ideas to investors, along with an agnostic opinion of the markets.
Said DeSaque has over 29 years of experience working as a professional economist in financial services, primarily based in London. His working role has involved extensive travel around the world, bringing him into contact with investors of different cultural backgrounds and investment requirements. Prior to establishing DeSaque Macro Research, Said held positions as Senior Economist and Investment Strategist at US banks Robert W Baird and William Blair. He began his career as a graduate at PaineWebber in 1986, where he became Head of the London Economics Department in 1996. This role allowed him to engage with senior investment professionals, alongside regulators and provided a unique perspective of market intelligence at work.
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