As 2018 approaches, investors are seeing the familiar rush of reports and predictions about the economic outlook for next year.
One of the latest reports comes from BlackRock Inc., which noted the effects of low volatility may persist amid a stable economic backdrop. The report, however, warned that even a small increase in volatility could scare markets as signs of leverage in the financial system appear.
Read: Institutional investors expect volatility spike in 2018
The report follows one released last week by Natixis Investment Managers that found the majority of global institutional investors anticipate 2018 will be a year of increasing volatility in both the bond (70 per cent) and stock (78 per cent) markets. And during a presentation of MFS Investment Management’s year-end investment outlook last week, the firm’s chief investment strategist, James Swanson, said investors should watch for warning signs heading into the new year, despite unexpectedly healthy macroeconomic growth across the globe in 2017.
BlackRock’s report noted low equity volatility is the status quo, as opposed to an anomaly, and that the current economic backdrop, which it classifies as steady, indicates little risk of a change to a regime of high volatility. However, it did highlight the need to monitor hidden risks, such as concentrated positioning in credit. It also doesn’t forecast any risks of a systemic crisis in 2018 but it refers to “potential triggers” for what it calls persistent market drawdowns.
“Even with equity markets reaching new highs, the U.S. ratio is showing few signs of the type of euphoria seen just before the 2000 dot-com crash and 2008 global financial crisis,” the report stated.
Read: Warning signs for investors in 2018
Given the flurry of predictions, how do you see the coming year playing out? Do you expect economic volatility will be a major concern for businesses and pension plans, given the environment of high valuations and political uncertainty? Or do you think the recent positive numbers are in step with economic fundamentals and that Canada and the rest of the world should be able to withstand any turbulence that 2018 has to muster? Have your say in our weekly online poll.
Last week’s poll question asked whether Canadian employees would be likely to use the new 18-month parental leave option that took effect on Dec. 3. The majority (66 per cent) of respondents said they’re not likely to use it, as few people can afford to live on 33 per cent of their regular earnings and many people would be wary of the potential impacts on their careers caused by being out of the workplace for so long. The remaining 34 per cent of those polled felt it’s very likely Canadians would take up this new option, suggesting that with the increasing cost and scarcity of childcare, it’s a good way to help families with young kids.
Read: Have your say: Will employees take the new 18-month parental leave option?