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How Might the Market Behave in 2018?

Clark Penney
January 2018


We just closed the door on an impressive year economically. The Dow closed the year over 24,000 and the S&P 500 reached a high of over 2,700.[1] And then there’s the fact that we’re experiencing the second-longest bull market since 1929. At eight and a half years, many people wonder how much longer the market can climb before we enter a bear market. While there’s no predicting what the market will do, and unexpected global and political events can throw a wrench into market cycles, here’s a big picture look at what the market might do in 2018.

A Growing U.S. Economy

Let’s start with a snapshot of the economy as a whole. With consecutive quarters of over 3% GDP growth and a prediction of another year of 2-3% growth,[2]the economy is still going strong. Add to that the fact that unemployment is still near record lows and jobs are being added at a healthy rate, and the outlook for 2018 is far from dismal. Inflation is expected to stay stable at 1.9% and the Feds will most likely raise interest rates to 2% through three separate hikes.[3]Oil costs are expected to increase and U.S. manufacturing is forecasted to grow at a higher rate than the rest of the economy. Tax reform may play a role in a housing slowdown with limited property tax and mortgage interest deductions. But with low interest rates and steady hiring, it will be minor, nothing like the recent housing crash.

All of this leads to 52% of Americans believing that 2018 will be a year of economic prosperity. [4]

Stable Markets

Geopolitical tensions, natural disasters, or a terrorist or nuclear attack could still trigger a market correction, but probably not a full-blown recession. Most authorities on the subject believe that this year will follow the bullish trend, although maybe not to the extreme of 2017. This past year gave us uninterrupted global monthly growth, which is unlikely to occur again. As a result, volatility may sneak back up.

According to Thomson Reuters’ 2018 S&P earnings forecast, growth of over 11% could occur,[5] and 85 of Wall Street banks surveyed expect the S&P 500 to close higher in 2018 than current levels.[6] Even skeptics see the market staying stable. They warn against expecting sizable returns, but say that the markets will hold close to current levels.[7]

This is good news, right? Yes, but predictions are just that. There is no guarantee that the markets will fall in line with what the most knowledgeable experts forecast. There is plenty of optimism, but what can happen with high expectations is drastic pullbacks when markets drop or the economy experiences a setback.

How It Affects You

As always, tried-and-true financial principles will serve you well, no matter what predictions come true. Whether experiencing ups or downs, stay disciplined and focused. Avoid emotional investing and the temptation to chase returns. Adhere to these time-tested principles as you prepare your finances for 2018:

Start with a Firm Foundation

Work with a financial professional to create a custom strategy that takes into account your short-term needs, long-term goals, risk tolerance and more. At Cypress Wealth Services, we use our in-depth analysis of your situation to identify the ideal mix of asset classes for your portfolio. We use various diversification and allocation strategies to minimize your risk exposure while helping maximize your wealth.

Have a Long-Term Perspective

The markets are always changing. If you check your portfolio performance every time there’s a shift in the markets, you will end up feeling overwhelmed and stressed. If you maintain a long-term perspective and stay disciplined in your approach, especially if you’re more than ten years away from retirement, you can feel confident in your plan.

Maintain Proper Asset Allocation

Your portfolio should be reviewed annually to ensure that it still reflects your appropriate level of risk. If it doesn’t, you may need to rebalance to keep your portfolio on the right track. Rebalancing consistently is one of the most proactive measures an investor can take to protect their wealth.

Know the Facts

Knowledge is essential for making informed decisions. Avoid falling prey to the media, which tends to exaggerate. Instead, stick to the information you’ve gleaned from your financial professional and what you know about your personal risk tolerance and goals.

A Final Word

The only long-term guarantee in investing is that there will be short-term fluctuations. We’ll experience bear and bull markets in the decades ahead just as we have in the past decades. As we enter into this new year, it is important to make sure your portfolio is positioned to take advantage of continued economic growth without putting you at too much risk in the case of a market correction. If you have questions about your portfolio or want to check in on your financial blueprint, contact one of our offices.


About Cypress Wealth Services

Cypress Wealth Services, an independent RIA firm providing financial planning and investment management to high net worth individuals, families, business owners, and institutions. CWS is comprised of professionals with diverse backgrounds and extensive experience and qualifications. CWS is uniquely qualified to serve a broad range of client needs. Their experience and expertise act as a foundation for their client service process, The Second Growth, which focuses on efficiently protecting, growing, and transferring to their loved ones the wealth and legacy a person has already built. With offices in Palm Desert and Anchorage, the firm serves clients across the country. Learn more by visiting