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The Market Outlook on the 2nd Quarter of 2018

The first quarter of 2018 has not been disappointing yet when it comes to economic surprises, new market volatility, and data to look at. If you listen to Manage the Funds Podcast you know we pay close attention to the Federal Reserve. The question everyone is asking is how much will the interest rate increase due to the Federal Reserve? The expectations with the market call for another short-term interest rate increase through the remainder of the year which is greater than 2%. It is important for a couple reasons. The first is the yield curve is beginning to flatten out. The last time this was noticed was in 2000 and in 2007. Another reason is as the Feds raise rates, they are going toward a more restrictive money policy, which is not helpful for our economy. There isn’t a week that goes by when we don’t hear about the relationship between the Trump administration and China. The situation between this trade war seeks attention and so much focus from the news that the potential it could get worse causes concerns. We worry about the corporate debt in China, but they share globally the largest GDP’s growth in the world making up for it at 35%. With tariffs being pushed by Trump and duties on certain items it is being watched closely. We hope a favorable deal will be worked out without an economic battle that causes heavy tariffs and intense trade war.

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