The Financial Trends to Look Out for in 2018

The new year is only a few days old, but already 2018 is shaping up to be an interesting time for finance. The US stock market has hit an all-time high, Bitcoin has dropped in value for the first time in months, and rate hikes have been widely predicted.

While we don’t have access to a crystal ball, there are a few trends that are already apparent through a combination of market movements and expert analysis. Read on for our predictions for the year ahead…

The decline of Bitcoin

Bitcoin was one of the biggest financial success stories of 2017. Between January and December, the price of one Bitcoin rose from £1,000 to more than £11,000, as crypto-currency trading started to enter the mainstream.

However, 2018 could be the year that Bitcoin comes crashing down to earth. Rival crypto-currencies such as Ripple and Ethereum have started to gain traction among investors, and may soon pose a credible threat to Bitcoin’s dominance.

Meanwhile, the UK, EU, and the US are working together to try to regulate the currency in an effort to crack down on criminal activities and tax evasion.

Any attempt at regulation or digital oversight would result in a cooling of the market, while the rise of alternative cryptocurrencies could dilute Bitcoin’s value even further.

On the positive side, this could lead to a stabilisation of the famously volatile currency, making it more attractive to risk-averse investors.

Belt-tightening in Britain

Sluggish economic growth has been predicted for the UK in the coming years, while rising inflation, low wage growth and the weak pound make it likely that 2018 will be another year of belt-tightening for British families.

The Bank of England is expected to increase the base rate later in the year. This will come as welcome news for savers, but bad news for mortgage-holders, who will no longer be able to take advantage of historically low rates.

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The rise of India

India currently has the sixth strongest economy in the world, and it is set to outgrow China in the near future. The IMF has predicted that India will see 7.4 per cent growth in 2018 – far higher than the one per cent forecast for the UK.

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A stable government, steady streams of foreign investment and increasingly wealthy consumer population should help to propel India to the top of the emerging markets indices in the year ahead.

New investment sectors emerging

New investment opportunities are emerging all the time, but 2018 is set to introduce some of the most radical new sectors to date.

Fintech continues to evolve, with edtech, regtech and insuretech likely to perform well in the year ahead, and vulnerable areas such as the automobile industry will be shaken up by the arrival of affordable self-driving software.

Elsewhere, expect to see more and more facial recognition tools becoming available.

Last year, Apple became the latest company to implement facial recognition on its smartphones, while the Met police have been using it to ID criminals for months.

Companies specialising in facial analysis will be particularly attractive to investors as this technology becomes more commonplace.

An unpredictable US market

At the beginning of January, the Dow closed above 25,000 for the first time ever, after a year of record-beating returns.

However, analysts have suggested that a crash could be imminent. Jeremy Grantham – the billionaire investor who correctly predicted the 2007/08 financial crisis – has publicly warned of a “melt-up” in the US stock market, which would wipe at least 50 per cent off the value of US shares.

Grantham’s predictions are based on his own theory that the current performance is being driven by the “unusual outperformance” of low-volatility stocks, and investors seeking “rapid gains”.

But there is another reason to suspect that US stock performance could be at risk in 2018. The Trump presidency is still under investigation by the FBI, and Paddy Power is offering even odds on Trump being impeached by the end of the year.

The betting site is also offering 11/1 odds that the stock market will be suspended in the wake of an impeachment hearing – a rare event which would certainly send stock values plummeting.

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Last updated: January 5th, 2018

Kathryn Gaw

Kathryn Gaw is a financial journalist based in Belfast, Northern Ireland. She has been writing about personal finance and investment trends for more than a decade, and her work has been featured in the Financial Times, City A.M., the Press Association, and The Irish Independent, among many other publications.

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