These Will Be The Big Markets And Economics Stories In 2018

Joe Weisenthal (0:08)

Hello, and welcome to another episode of the Odd Lots Podcast. Once again, sadly, Tracy Alloway is not here, so I have to do soul hosting duties. The good news is I have two fabulous guests in the studio with me. So last week, we talked about 2017 themes, the big stories that we saw over the last year. And so we have the same two guests on this week, Chris Nagi and Matt Boesler of Bloomberg News. And this time we're going to look forward and try to see what we're going to be talking about in 2018 Chris and Matt, thank you very much for joining us.

Chris, let's start with you.

What's your S&P 500 forecast?

Chris Nagi (0:56)

So my S&P 500 forecast is the same as it would be every year, which is that the S&P will rise approximately 9.3%. My actual prediction, though...

Joe Weisenthal (1:05)

Wait, is that because 9.3% is the average of all the year?

Chris Nagi (1:08)

Actually, I'm making that up. It's roughly that. But I just feel like that's the one thing that you should predict when asked that question. I feel like there's a possibility in 2018 that even if you get the 10% roughly gain in the S&P, the sentiment towards the stock market seems to me to be on the cusp of souring in a weird way. You have Donald Trump associating himself with the run-up, and you have the tax bill that just passed, and a lot of sort of populous offense is being taken towards the tax bill. The way they're framing their objection to it is that it's essentially a gift for the 1% or to a big corporate donation.

And I feel like if you see the things that the Trump critics are predicting actually happen, particularly if you see companies take their windfall and basically shower it on their shareholders, and that causes a kind of meltup in the stock market.

The stock market is a kind of political whipping boy. That theme I could see take off a little bit.

Joe Weisenthal (2:04)

I really like this. So the gist being Trump tweets about the stock market all the time, it's obviously doing phenomenally well, but ownership and participation in the stock market is not that widespread.

And so what you then get is this contingent of people who resent the rising stock market and this feeling like all these people are getting richer are other people.

Chris Nagi (2:25)

I mean, and the stock market, if you think about it, it stands for a lot of things that already annoy people a lot. It stands for the margin impact of automation and the monopolistic powers of companies like Amazon and the outsourcing of labor. I think there's a general consensus or there's a feeling that basically pays off in the stock market. So there's already a kind of approaching critical mass for vilification of equity. I mean, it's hard to imagine. I mean, everyone always said big thermometer of US wellbeing is the stock market. This could be completely wrong. Maybe everyone will be happy, but yeah.

Joe Weisenthal (2:58)

I really like that. So in 2017, the theme was the stock market is boring. And in 2018, the theme is everyone's angry at the stock market.

Matt, Chris mentioned the tax bill and the perception that it's largely a gift to corporations and the wealthy. And something that I've been really struck by interviewing people mostly on TV is I have yet to hear from a single economics person or even a markets person who is not associated with the administration, who thinks that this is really going to ignite a real spark in the economy. Have you talked to anyone who thinks it's actually gonna move the needle on the economy?

Matt Boesler (3:38)

No, I mean, the only thing we've seen in that regard is the Fed's latest round of forecast, which they weren't really able to fully explain why they're expecting such a big bump to growth next year. But it's interesting because at the same time, we have these sort of cyclical forces where nine years into this expansion, it looks like we might actually be on the cusp of a pickup in productivity growth in 2018 and the types of things that would lead businesses to spend more and invest more. And so just thinking about that in terms of the likely Trump tweets that we're going to see, it's kind of interesting because again, that might turn out to be a red herring, but it's gonna be, you know.

Joe Weisenthal (4:18)

I'm already imagining how furious his critics and detractors are going to be when the economy starts taking off because we hit a certain point in the cycle that would cause greater capital investment and Trump and all his fans are citing the tax cuts.