Are We in for a Bull Market in 2018?
January 25, ​2018
Last quarter, we predicted that business spending would accelerate. We have since seen that materialize and we believe this is only the beginning, especially because the recently passed tax reform legislation paves the way for businesses to ramp up spending.

I was recently asked on Fox Business if I think we will see a negative return on the S&P 500 this year, which investor Jeffrey Gundlach has predicted. My answer is no — the economy is too strong and I don’t foresee a recession this year. Alger’s research team, which comprises experienced, sector-focused analysts, has scoured many industries and all indications suggest 2018 will be good for the market.

In addition to tax reform, high levels of business confidence and strong earnings growth are likely to support an increase in business spending. So what does this increase in business spending mean for the markets and the economy in 2018? An increase in corporate investment is likely to drive productivity growth. The increase in productivity, in turn, is likely to support economic growth.

​ As we explained in our Winter 2018 Capital Markets report: “Investment is a key driver of productivity, which in turn dictates long-run economic growth. Therefore, we are hopeful that the surge in business spending that we anticipate will boost the long-run potential growth of the U.S. economy. Then we can all stop hoping for more hours in the day.”

With many indicators suggesting that economic expansion and corporate profit growth will continue, the following question is timely: Which sectors are worthwhile investments in 2018?

We can identify four exciting sectors that we believe will have strong results. The first two likely come as no surprise: Information Technology and Health Care. We also believe that the Financials sector is in for a robust year in 2018 as well. Last but certainly not least: Industrials. Parts of the Industrials sector have been coming out of a recession of their own over the last few years following the energy boom. They have now stabilized and we expect 2018 will be a particularly good year for the sector.

For more details on our productivity outlook productivity and the impact of increased business spending on the economy, please see our Winter 2018 Capital Markets report.​

Fred Alger & Company, Incorporated is the parent company of Fred Alger Management, Inc. The views expressed are the views of Fred Alger Management, Inc. as of January 2018. These views are subject to change at any time and should not be interpreted as a guarantee of the future performance of the markets, any security or any strategies managed by Fred Alger Management, Inc. These views should not be considered a recommendation to purchase or sell securities.  Individual securities or industries/sectors mentioned, if any, should be considered in the context of an overall portfolio and therefore reference to them should not be construed as a recommendation or offer to purchase or sell securities.

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