Stocks: 10% gains in 2018?


Our outlook for the Dow Jones Industrial Average is positive heading into the New Year.

In our opinion, we’re likely to see a gain in excess of 10% in 2018 and the DJIA Index may close above 28,000 by year end 2018.

The strong momentum we have seen in the US stock market has been driven by a solid and expanding global economy, strong corporate profits and an increase in investor confidence.

 

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Tax Cuts

With the passage of the tax reform bill, many US companies will see significant benefits to their bottom line in 2018.  

This will continue to fuel the upward trend in the stock market.

While we may see a correction in the market in 2018, it is unlikely that we will see signs of deterioration in the US economy or corporate profits.  

With interest rates remaining low, the threat of inflation remains minimal in our view.

 

Economic Fundamentals

We are in the latter stages of the business cycle.  Many thought the recovery would start to lose steam by now.  

During the first five years of this recovery we had low GDP and slow growth.  

This has enabled the expansion to continue beyond the normal 5-7 year recovery phase of the business cycle.

 

Strong Momentum

The momentum phase of the stock market rally will continue in 2018.  

Many investors who have had cash on the sides for a long time do not want to miss out on this rally.  

While valuations appear high for many stocks, companies will continue to show solid results in 2018 justifying these higher valuations.

With no major concerns for the market recovery remaining strong in 2018, we continue to be fully invested in the market.

 

Photo Credit: thenails via Flickr Creative Commons

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Cratus Capital LLC
Cratus Capital LLC
Daniel Johnedis, CFA, CIC, President and Chief Investment Officer
Cratus Capital, LLC, a Registered Investment Adviser