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Alternative Investment Industry foresees continued strength of U.S. economy and a Fed rate hike in 2018

Friday, January 12, 2018
Opalesque Industry Update - With the United States well into its third longest period of economic expansion to date, economists are wondering how long the markets will be able to continue rising and whether or not the seemingly endless surge in the price of Bitcoin indicates that we are in the midst of a bubble that is soon to burst. And with 2017 having drawn to a close with the passage of a new and controversial tax bill, the looming Mueller investigation and increasing tensions between U.S. foreign policy towards countries such as North Korea and Israel, among others, there is uncertainty about how these things could potentially impact the U.S. economy in the year ahead. Given such uncertainty, The New York Alternative Investment Roundtable recently conducted a survey regarding expectations for the year ahead.

"A Strategist's Outlook for 2018 & Beyond" was the topic of The New York Alternative Investment Roundtable's December event, where Joseph LaVorgna, Natixis' chief economist, and Peter Cecchini, senior managing director, co-head of equities, chief market strategist and global head of equity derivatives for Cantor Fitzgerald shared their thoughts on the year ahead.

Members of The New York Alternative Investment Roundtable believe that the U.S. economy will continue to strengthen and that, as a result, the Fed will raise interest rates at least once in 2018. Despite ongoing confidence in the U.S. economy, however, Roundtable members believe that Emerging Markets are poised to be the best performers in 2018.

New York Alternative Investment Roundtable members had the opportunity to weigh in with their predictions for the year ahead at the Roundtable's December event, as well as through an online electronic poll.

*Of the respondents to this survey, 38% were fund managers; 21% were allocators; 17% were risk management or trading; 21% were service providers; and 3% were other industry participants.

Following are some of the key findings of the survey:

  • When asked how the market will perform in 2018, 28% of respondents believe it will be up between 0% and 5%; 41% believe it will be up more than 5%; 24% think it will be down between 0% and 5%; and 7% think it will be down more than 5%.

  • Asked how the Mueller investigation is likely to impact the equity markets in the coming year, 21% of respondents think it will negatively impact the market; 24% think that the market will continue to go up, despite the investigation; and 55% think that the investigation will not have any impact on the markets.

  • 89% of respondents believe that the U.S. will remain a global economic superpower, while 11% think the U.S. will lose it status as an economic superpower. When asked in August 2017 whether or not the U.S. would remain a global economic superpower, 94% of respondents said that they believed it would, while only 6% believed it would not.

  • Asked where assets under management within the hedge fund industry will be three years from now, 55% of respondents believe assets will rise above the $3 trillion mark, while 45% believe they will be below $3 trillion. Comparatively, when asked this same question back in February 2017, 71% of respondents said they expected assets under management within the hedge fund industry will be above $3 trillion three years from now, while 29% believed that assets under management will fall below the $3 trillion mark.

  • When asked where the price of a barrel of crude will be by the end of 2018, 4% of respondents believe it will rise above $70; 36% think it will be in the $60 to $70 range; 43% think it will be in the $50 to $60 range; 14% think it will be in the $40 to $50 range; and 3% think it will fall below $30 per barrel. Comparatively, when asked back in January 2017 where the price of a barrel of crude oil would end the first quarter of 2017, 41% of respondents said they thought it would be in the $50 to $60 range; 32% thought it would in the $40 to $50 range; 14% thought it would be between $60 and $70; 8% thought it would be above $70 and 5% thought it would fall below $35 per barrel.

  • Asked how the U.S. economy will perform over the next 12 months and whether the Fed will likely raise interest rates in 2018, 7% of respondents think that the U.S. economy is going to weaken and that, as a result, the Fed will be forced to hold off on its plans to raise interest rates until at least sometime in 2019; 62% of respondents think that the economy will strengthen in the year ahead and that the Fed will raise interest rates at least once in 2018; and 31% think that the Fed will reassess monetary policy based on potential geopolitical risks and changes to the tax code before tightening further in 2018. Comparatively, when asked back in August 2017 how the U.S. economy would perform over the next 12 months and whether the Fed would likely raise interest rates again in 2017, 61% of respondents said they believed that the economy would strengthen and that the Fed would raise rates at least one more time in 2017; 27% thought it was unclear how the economy would perform and that, as a result, the Fed would hold off on raising rates again until 2018; and 12% thought that the U.S. economy would weaken and, as a result, that the Fed will be forced to hold off on its plans to raise interests rates until 2018.

  • When asked to rank the United States, China, Europe, Japan and Emerging Markets in the order they believe they will perform in 2018, 22% of respondents believe that the U.S. will perform best; 17% believe that China will perform best; 22% believe that Europe will be best; 6% believe Japan will perform best and 33% believe that Emerging Markets will be the winner in 2018. Conversely, 22% of respondents believe that the U.S. will be the worst performer in 2018; 11% think China will fare worst; 33% think that Europe will perform worst; 22% think it will be Japan and 11% think Emerging Markets will be the worst performers. Comparatively, when asked back in February 2017 to rank the United States, Europe, Japan and Emerging Markets in the order that they believe they would perform in 2017, 57% of respondents believed that the U.S. would perform best, 29% thought Emerging Markets would do best, 8% thought Europe would perform best and only 6% thought that Japan would do best. Conversely, at that time 38% of respondents believed that the European market would be the worst performer in 2017, 33% thought Japan would be worst and 29% thought that Emerging Markets would be the weakest performers.

What do you think?

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