With the DOW in its 6th straight gain today and back in black for 2018, the stock market may be back on its 2017 trajectory to over inflation. The Volatility Index (VIX) also seems to show that the market is ‘almost’ back to its pre-correction condition.
If the stock market is back on its growth path, then I suspect we won’t see growth levels like 2017, but it is certainly plausible that will surpass the January high of 26,617, and by my most optimistic projection reach 28,000 by years end.
As I predicted in my post from March 1, Brent Crude is on the up. I estimated that we would see a rise from $62 in March to $80 by the late-summer. So far, we are entering the summer months and hovering between $76-77, so we seem to be on track there.
Unemployment has fallen to 3.9 percent as of April, and the labor market is tightening up. I would guess that the unemployment rate will remain fairly constant at around 3.8-4.1 percent for the rest of the year. However, with growing numbers of labor market drop outs, the recent upward trend in labor force participation should begin to reverse in the coming months. My prediction is that we will begin to head down ward to around 62 percent by years end.
As for the bond market, there is a lot to say. The Fed is dumping $600 billion in bonds from its balance sheet annually, whilst the Federal government is selling around $1 trillion in bonds. Combined, the market is going to have to absorb a lot of federal debt, but not at current interest rates. The 10 year bond is currently hovering around 3 percent, but we will see a continuing upward trajectory, perhaps as high as 3.5 by the end of 2018.
Predictions for end of year 2018:
Dow between 26,617 and 28,000
Brent Crude at, or above $80 per barrel
Unemployment unchanged around 3.8-4.1 percent
Labor Force Participation around 62 percent
10 year bond yield around 3.5 percent