While some economists believe that the American economy is heading towards another period of recession, some Wall Street analysts think that the prolonged stock market rally is bound to continue after absorbing a few bumps between now and the end of the year.
In a recent interview with financial news network CNBC, an executive at Nuveen, a major investment banking firm based in Chicago, explained that significant financial developments are not expected in November or December, and this may result in an overall slowdown on Wall Street; nonetheless, investment advisors at Nuveen also believe that the stock market could grow by more than eight percent in 2018.
Nuveen’s Chief Investment Officer Brian Nick explained that the positive projection is based on corporate earnings and profits, which have been very strong in 2017 and could continue to please investors in 2018. Most of the S&P 500 companies that have posted earnings since reporting season started in mid-October have exceeded expectations by analyst; the first report was delivered by banking giant JPMorgan Chase, and it set off a wave of record high S&P 500 numbers. On the Friday that capped the first week of earnings season, both the Dow Jones Industrial Average and the S&P 500 closed with record highs.
Wall Street has enjoyed a honeymoon year against all odds. The chaotic Trump administration has failed to dampen investors’ spirits; however, the recent indictments in the Russia investigation and uncertainty over what will happen with tax reform will likely test the resolve of investors and set a bearish cloud over Wall Street.
It is important to remember that the Federal Reserve will meet twice more this year, and that there is a strong chance of the prime rate being increased before 2017 comes to an end. President Donald Trump is also expected to appoint the person who will replace Janet Yellen as the Chair of the Federal Reserve. These are all developments that may not resonate with Wall Street; for this reason, it is not unreasonable to expect a downturn between now and New Year’s Eve.
Consumer confidence is another factor propping up Wall Street these days. According to a recent survey conducted by the Conference Board and the University of Michigan, the current level of consumer confidence is the highest in the 21st century, and unemployment levels are at record lows; these two factors will certainly help Wall Street keep its current course.