Global markets ended the year 2017 with a gain of almost 20% and FTSE STI was up 18.13% for the same period. It was nevertheless a very good year for global stock markets with many believe the bull market since 2009 recovery of the GFC was back and expecting more good years ahead.
Recap
As mentioned in Recap 2016 & Looking Ahead 2017, 2017 was all about execution and how markets react to those. US Fed did what was being projected to do in end of 2016 that was to hike rate 3 times so nothing surprise about it and markets reacted well for those execution. UK also manged to strike a deal with other EU nations on the Brexit. However, what US President and its lawmakers did were rather a little missing the expectation in term of expectation. The healthcare plan that supposed to replace the Obamacare was not well executed. The tax reform took the whole year to iron out while the threat of US Government shutdown still loom when the deal regarding its debt still in progress. China, the Asian growth engine (probably the global growth engine since 2008 GFC) embarked on its next growth phase with the One Belt One Road plan while Asian Pacific countries were trying to finalize the TPP (minus US).
The big problem in 2017 was none other than North Korea with its several testing of missiles. The range of its missiles as estimated could hit US which was frightening. The UN sanctions against North Korea of its nuke appeared to be ineffective given the frequency of its missiles testing. That was a big worry in term of execution by UN with regard to North Korea's nuke program.
Opec cutting of supply seemed to work as crude oil price recovered from the crisis some 3 years ago with price now around the US$60/barrel. That probably one bright spot for the future of oil industry.
Another bright spot for 2017 was none other than Cryptocurrency, the crazy run up resulting in bitcoin hitting as high as USD$20,000 despite warning from numerous Central Banks.
Singapore registered an advanced estimate of 3.5% GDP growth for 2017 thanks to the global recovery after hitting a low of around 2% in 2016, the lowest since 2009 recovery of GFC.
Looking Ahead
If 2017 is all about execution, then 2018 will be about execution and complacent. For 2017, global markets in general reacted positively for all the executions (be with above or below expectation) and this is where complacency starts to build up. US Fed is projected to do another 3 rate hike in 2018 while the pace of its inflation appears to be below its expectation. US President will have to work harder to push through more bills to reform its economy after struggling through the whole of 2017 in the healthcare and tax reform. For rest of the world aside from any unexpected events should see a better growth rate than 2017.
Will crude oil price continue to recover and more higher is a big question in 2018. The Opec cut in supply could be derailed by the increase from US shale gas.
North Korea with its nuke and missiles issued were not totally resolved in 2017 and should not be expecting that in 2018 either. Probably the only hope is for the situation not getting worse. That is probably one unforeseen risk in 2018.
Will the bubble of Cryptocurrency finally burst ? I do not rule out the possibility of that and will it cause another global financial crisis ? That will depend on how many of those financial institutes (those big name type) get involve in it. It kind of remind people of the 2008 subprime crisis and the bankruptcy of Lehman Brothers.
Will Singapore going to have a better year ? I would not be surprised if the answer is a NO. From my technical analysis (STI Analysis -- the next peak and trough ?), we have a high probability of seeing some significant events in the stock market or economy in 2018 - 2020. We could be seeing a new all-time high in STI either in 2018 or 2019 and then a recession and market trough in 2020. Should we have another heavy recession like those in 1998 (AFC) and 2008 (GFC) then the statistic will be looking very interesting. Singapore economy practically was on a downtrend since 2009, hitting a low in 2016 before the rebound in 2017. That is to say from 2009 till 2020 (potentially the next recession), for a period of 11 years we have 7 years of declining growth and only 3 or 4 years of improving growth. That is to say for about a decade, more than 50% of the time Singapore economy is not doing well. So should we be happy about the 3.5% GDP growth in 2017 ?
Singapore Government looks to form the 4G Government this year. If the present Government under the guidance of the 1st and 2nd generation of leaders (1st until LKY passing away in 2015) produced that kind of sluggish performance to our economy (and not to mention those many hot buttons local issue like SMRT, lift breakdowns, high cost of living, etc) in the past decade, what is the probability that the 4G Government, the one being groom by 3G Government can perform better ? Rather to believe in the 4G Government or have faith in them, it will be better and make more sense to take the opportunity in stock market to build up the wealth to provide that much needed cushion against the performance of the 4G Government.
To sum up, 2018 is all about execution and complacency and building of bubbles for the next crisis. While one probably expecting some good years in the short term, the one to watch for will be the next crisis and that could just happen in one of the year between 2018 to 2020.
