Even after a nine-year run of positive growth, there still is optimism that the stock market will continue to grow in 2018 — but investors must be mindful of their risk tolerance and plan for the long-term.
Those were among the messages from two financial experts presenting Northwest Bank & Trust Co.’s 2018 Financial Market Outlook to a luncheon crowd Thursday at the Outing Club, Davenport.
“There has been some concern over how quickly the stock market has risen,” said Dan Phillips, director of asset allocation strategy for Northern Trust Asset Management. “But it has been driven by good earnings and low inflation and that makes stocks attractive.”
“Equities have room to run as we head into 2018,” said Phillips, a Bettendorf native.
He was joined by Keith Bonjour, vice president and portfolio manager for Northwest Bank’s Investment Management Group. Speaking to about 120 Northwest clients and bank staff, the pair detailed historical data about the market’s performance, looked at the 2017 stock market and offered an outlook for 2018.
“There has been a tremendous run in the market,” Bonjour said. “We have cautious optimism for where the economy is going.” He pointed to low unemployment and very low inflation as “underlying fundamentals of a very strong economy.”
Phillips said predictions call for the U.S. stock market to grow between 6 and 7 percent and the international market to continue to look attractive. The non-U.S. equities, which many shied away from before, showed strong returns in 2017, he said.
But Bonjour said how Congress’ recent tax cuts impact GDP growth, corporate spending and individual taxpayers’ spending must be watched closely. “We will see if they’re going to save it, spend it or pay down debt,” he said of individual taxpayers. “Consumer optimism is strong right now.”
The big risk, Bonjour added, will be any missteps in monetary policy by the Federal Reserve or a slowdown in China, which could effect the global markets.
After the hour-long program, Cody Allen, Northwest Bank’s Investment Management Group’s senior vice president, said “From an investment standpoint, the new tax changes don’t have a significant impact on the individual investor because dividends and capital gains did not change.”
But attention is on how the corporate tax rate reduction effects corporations — do they spend the savings on expansions, return it in bonuses to employees or make other investments. Allen said that investors’ 401ks, IRAs and trust accounts “are invested in those companies.”
Thanking the clients for their strong referrals, Allen said Northwest’s trust department has grown from $100 million under management 11 years ago to $270 million under management today.
With a roomful of investment clients on hand, Bonjour said they need to know “if you are invested for the long run, stick to your risk tolerance and don’t make rash decisions based on the volatility in the market.”
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