A new report by Manulife Asset Management, Global Intelligence: Outlook 2018, forecasts that while volatility is expected to stay low in 2018, risks remain.
"The abundance of capital and the easing monetary conditions across the globe have allowed us this period of time where we've seen remarkably low volatility and our forecast for 2018 shows continuing easing conditions," says Bob Boyda, Head of Capital Markets and Strategy.
Priced for perfection
However, Boyda adds that the prospect of rising costs, unexpected market response to Fed actions and unresolved geopolitical tension could hurt U.S. corporate profits. "If profit margins come under pressure from rising wage costs, interest costs and potential cost increases in areas like energy – with equities having been priced for perfection, investors could be disappointed."
Megan Greene, Chief Economist, agrees, adding that the world remains in a low growth, low inflation and low rate environment, despite the global synchronized recovery. "The IMF upgraded its global economic forecast for the first time in years," she says, "but we believe the downside risks outweigh the upside risks and the markets have not priced it in."
To learn more, consult the report on Manulife Asset Management’s website.