After a great 2017 (for stocks), investors will now be mulling over what’s in store for this year. Chances are high that optimism will be quelled a bit. Trump bump is largely baked in now and the Fed is less likely to cause much upheaval this year. The global economy including the United States has picked up momentum.
Against this backdrop, we have made some ETF predictions for 2018.
Stocks to be Bullish Overall
The year can be attributed to stocks. The first and foremost reason for this is a pickup in corporate earnings. Along with earnings improvement, stabilization in the oil patch after a prolonged rout and a Trump-induced fiscal boost along with lower taxes should augur well for stocks this year.
Still, with markets appearing overvalued by some measure, cautious investors with a long-term notion can opt for value ETFs over growth. Cambria Value and Momentum ETF (VAMO - Free Report) and PowerShares S&P 500 Value With Momentum (SPVM - Free Report) could be a good picks in this regard.
Recurrence of Success in U.S. Large-Caps
Moderate dollar strength and upbeat global economy will put large-cap stocks in a sweet spot again in 2018. Investors’ fondness toward large-caps can be verified from solid asset gains by new funds like Schwab 1000 Index ETF (SCHK - Free Report) (the owner of $202 million making a debut in October) and IQ Chaikin U.S. Large Cap ETF (CLRG - Free Report) (which amassed about $46.8 million in assets entering the market only in December).
Commodity ETFs to Stay Strong
A pickup in global growth with every major economy witnessing growth in almost a decade led to bullishness in the commodity space lately (read: Follow Goldman to Invest in Commodity ETFs for 2018).
Goldman Sachs expects commodities to rise almost 10% in 2018, against its previous forecast of 4% returns. Additionally, the tightening monetary policy in the United States will support the rally as commodities perform well during periods of rising interest rates (read: ETFs to Gain/Lose if Fed Turns Hawkish for 2018).
Along with Goldman, we too expect copper to turn around in 2018. Owing to the Chinese government’s crackdown on pollution, state run Jiangxi Copper was asked to cut production. China is the largest consumer of copper. So, such a move matters a lot in copper investing (read: Copper ETFs in Focus on Rising Demand).
Euro Will Likely Repeat 2017’s Success
The year 2017 can easily be credited to euro in the currency ETF world. CurrencyShares Euro ETF (FXE - Free Report) gained about 14.5% in 2017. Investors are betting on a likely strengthening in the single currency in 2018 after a great 2017, “its best year versus the greenback since 2003.”
Goldman Sachs is also bullish on euro. After all, in a historic meeting in October, the ECB announced that it would extend its asset-purchase program through September 2018 at a reduced rate.The meeting marked the ECB’s first withdrawal of stimulus. The year 2018 could also mark the start of rate hike by the ECB. If this happens, euro ETFs will soar (read: After a Stellar 2017, Will Euro ETFs Beat Greenback in 2018?).
Bitcoin ETFs Have High Chance of Hitting Market
The year 2017 was all about bitcoin’s momentous journey. The investing world is now in two minds. One group thinks that the cryptocurrency will keep on crossing milestones in 2018 as well and another thinks the asset will finally crash (read: Bitcoin ETFs: What Lies Ahead in 2018?).
The first futures contract on Chicago Board Options Exchange (CBOE) is already launched on Dec 10 and many issuers have filed products, either futures based or on physical asset. We expect, at least an ETF will see the day of the light, though at the cost of more regulations.
International Bond ETFs May See decent Capital Gains
The Fed has currently forecast three rate hikes in 2018. However, there are several international bond ETFs that offered great returns during 2017 and may do so this year too. Since most of the developed economies are still practicing a low interest rate policy, international bonds got a chance to perform well.
iShares International High Yield Bond ETF (HYXU - Free Report) , PowerShares International Corporate Bond Portfolio (PICB - Free Report) and SPDR Bloomberg Barclays International Corporate Bond ETF (IBND - Free Report) are some of the products that are poised for gains (read: 5 Best Bond ETFs of 2017).
India, China to Prevail
India economy is back on track as it has emerged from the short-term adverse impact of the goods and services tax and remaining after-effects of demonetization. On the other hand, the largest economy of the developing nation, China, is trying to maintain a 6.5% growth rate.
Though this high standard doesn't give the administration much opportunities for “structural reforms”, Chinese policymakers indicated at a transition to an agenda of checking pollution and financial risks over economic growth at any cost. Overall, India and China ETFs like iShares India 50 ETF (INDY - Free Report) and WisdomTree China Ex-State-Owned Enterprises Fund (CXSE - Free Report) are set to gain.
Be Bullish on Brent
Oil prices logged their most solid opening to a year since 2014, thanks to geopolitical crisis in Iran and ongoing output cuts led by OPEC and Russia. Higher global growth and declining inventories, should support Brent crude in 2018 (despite steady U.S. crude output). United States Brent Oil (BNO - Free Report) may thus scale higher after gaining 17.6% in the last one year (as of Dec 29, 2017).
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