Key market calls for 2018 and beyond

We are forecasting that the Fed will be a bit more hawkish this year than the markets appear to be envisaging. In our view, the US economy, which is already close to full capacity, will start to slow in the second half of 2018 as monetary tightening takes a toll and the boost from fiscal stimulus fades. In much of the rest of the world, though, monetary policy is likely to stay very loose this year and growth is generally likely to hold up well throughout 2018. Next year, we project that the Fed’s tightening cycle will end in the spring as the slowdown in the US becomes more apparent. Monetary policy is also likely to become less accommodative in many other places, with interest rates finally rising and growth slowing. This economic and policy backdrop feeds into our key market calls for 2018 and 2019. This Global Markets Update outlines those calls and discusses our latest forecasts.