Will The Economy Correct In 2018?

What’s in store for the US economy in 2018? How can you ensure you finances stay flush, no matter what?

Reports proclaim the US economy is strong and growing again. New records seem to be continuously set in asset values, startup valuations, and stock prices and indexes. Will it keep going up in 2018?

2018 Economic Forecasts

So far economic predictions for the next year appear to be very bullish.

Fortune predicts that housing prices will rise, oil prices will stay modest, and the IPO market will surge to almost double, at over $70B in 2018. Goldman is predicting a “boom” in 2018, thanks to a pro-growth administration in Washington DC. The Balance forecasts that GDP and manufacturing will keep increasing through at least 2019. So, will inflation and interest rates.

Jobs in some sectors have been growing. For example; construction. They have been crushed in other categories, such as retail. The real unemployment rate is still believed to be 9.4%, and could be much higher. Though it is still the lowest since 2008. Expect more confusion in this data as types of work change.

Factors Influencing the Economy Ahead

Aside from the potential for more natural disasters which can cause contractions and then surges, there are several factors to watch in 2018.

Affordability is the biggest. Most notably in the gap between wages and net income versus housing prices. The new tax reform bill also has the potential to cause a variety of impacts. Many breaks have been stripped down. Those were expected to be made up for by cutting corporate taxes. However, while American taxpayers may lose common breaks beginning in 2018, business tax cuts may not kick in until at least 2019.

Stock performance is another. Markets are up at least 20% in the last year, even though they were believed to be 60% or more overvalued before that. There are many ways to stretch rough evaluations, especially for startups. Being able to maintain value, growth, and dividends at big companies could prove to be incredibly difficult.

Retail could prove to be a big drag on the economy of the next 12 months. Retailers are going bankrupt, are closing stores by the thousands, and are laying off even more workers. That is going to have a residual effect on retail real estate, and local community economics.

Disparity in the Economy

Some may be reading this and are bewildered at how optimistic others are. The reverse will be true for others as well. There is incredible disparity in the US economy today. A disparity which may be solved, or made far worse by technology. In fact, according to Local Market Monitor, the vast majority of the nation’s GDP is coming from just a couple dozen cities. The rest of the country is still struggling with a hangover from the recession. That’s why we have wild housing prices in some areas, where even full time workers, and multi-worker households are homeless.

There are really no longer any solid reasons that this concentration of wealth and jobs has to continue. Once people realize this and are fed up to the point of taking action, things will even out. This could mean a correction in property and living costs in some ultra-expensive areas of the US, while spurring far more national growth as people spread out to more affordable places. In this case, a correction would be both good and bad, depending on where you live and hold property, but very beneficial for the nation as a whole.

How to Stay Flush No Matter What

The keys to staying in the green, no matter what quirks and twists come along in the next 12 months is really diversification. It could be time to exit certain types of mature stocks, like traditional automakers and banks, and retail. Real estate investors can stay ahead by diversifying geographically and into different price points. Many may find it wise to diversify into different, but related businesses, so they can stay within their circle of competence, but benefit from any direction the market turns.

About the Author

Kent Clothier is President and CEO of Real Estate Worldwide (REWW), a multi-faceted real estate education company with headquarters in Scottsdale, Arizona, San Diego, California, and Boca Raton, Florida.

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