Business Insider editor-at-large Sara Silverstein sits down with Jeffrey Kleintop, chief investment strategist at Charles Schwab, who outlines his equity outlook for 2018. He’s optimistic, and cites what should be back-to-back years of broad global economic growth. He also mentions that earnings growth will continue to be strong after a banner year in 2017. On the downside, he notes that yield curves have flattened, which could be a negative for stocks with high valuations.
Kleintop outlines his biggest stock market risks for 2018, which include a Chinese economic growth slowdown, natural disasters and geopolitics. He says that these possible risks could come into play in the second half of the year, if economic growth starts to slow. Kleintop doesn’t express any worry around the Federal Reserve or inflation, saying that we’re starting to see a clearer path for inflation, which will make the central bank more data dependent again. He also says the market is already braced for the Fed’s rate hikes in 2018.
In terms of a geographical preference, Kleintop says that he favours international stocks, which are more cyclical, inflation-sensitive and attractively priced. He notes that the correlation between stocks around the world is at the lowest in 20 years, which improves the market for global diversification.
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