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Stock Market Cycles

2018 Investment Outlook

7 Minute Read

It’s 2018, and everyone’s looking to get a jump on their investing for the new year. So, what are some stock market trends to watch out for in the next 12 months?

Before we dive in, hear me say this: No one can predict exactly what the economy will do in the next year. That’s the honest truth you won’t hear from many investing "experts." There are a few economic indicators that can help us be aware of what might happen in the stock market, but, you’ve got to remember, these are just pieces of information—statistics or trends—that could show something bigger going on in our financial system.

So, keep that in mind as you look at what’s going on in our economy and as you make financial decisions for you and your family.

What Are Economic Indicators?

Economic indicators are statistics used to gauge future trends in the economy.

Let’s take a look at some of the major economic indicators, and what they mean to you and your money.

Unemployment Rate

The unemployment rate is a lagging indicator—meaning it reflects changes that have already happened. It simply tells us how many people got (or lost) a job. The Bureau of Labor Statistics thinks that rate will drop to 3.9% in 2018, down from 4.1% in 2017 and 4.7% in 2016.(1)

What does that mean for your investments? If companies are hiring, that usually means they’re growing. As their fortunes improve, so can yours—especially if you’re investing in those companies through mutual funds in your 401(k) and IRA.

Interest Rates

The bank prime interest rate—the rate that home equity loans and auto loans are based on—is determined by the Federal Reserve. The Federal Reserve increases or lowers this rate to stay ahead of inflation. Interest rates are a significant economic indicator to pay attention to as you start investing.

With strong employment numbers and the prediction of higher wages in 2018, economists think the bank prime rate will jump from 4.25% up to 5% in 2018.(2) That means interest rates on both 30-year fixed-rate mortgages and 15-year fixed-rate mortgages will be higher for home buyers in 2018. At the end of the day, though, nobody really knows since so many components go into forming the interest rate.

Consumer Confidence Index

The Consumer Confidence Index measures how everyday Americans feel about the economy. When people are confident, they typically spend more money and save less. The opposite often happens when their confidence is low.

Consumer confidence is usually strong when unemployment is low, interest rates are low, and people have more disposable income. That’s what we experienced in 2017, and consumer confidence is predicted to stay high in 2018, although lower than previous months. The extent of the decline is minor in the grand scheme of things, as the rate still falls in the mid-90s.(3)

Why does this matter to you? Because when you feel good about the economy, you might be tempted to increase your lifestyle spending when you get a raise, for example, instead of sticking to your retirement savings plan. Don’t give in! Keep investing 15% for retirement even when your salary gets a bump.

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Stock Market

The S&P (Standard and Poor’s) 500 measures the performance of the 500 largest, most stable companies in the New York Stock Exchange. The S&P 500 is often considered the most accurate measure of the stock market as a whole. When the index increases, the economy is usually doing well. Make sense?

Earlier 2018 estimates for the S&P 500 were pretty positive. But after the passage of the most recent tax bill, big companies like Credit Suisse Group and Wells Fargo & Co. boosted their 2018 predictions for the S&P 500 even higher.(4)

Here’s an important word of caution: When your investments are doing well, you may be tempted to sell them for some quick cash. But stock market investing, even through mutual funds, is like riding a roller coaster. Once the ride gets going, you don’t want to jump off. Don’t touch your investments until retirement! If you want to reallocate them to different types of investments, talk to your financial advisor. Otherwise, leave them alone, people!

Housing Market

First, the good news: Home sales are expected to stay hot through next year, and sellers are in a position to unload their homes at a profit.

Now, the bad news: Demand far exceeds supply, so buyers will have to be competitive and motivated to snatch up a home this year. According to the Home Buying Institute (HBI), home prices in the U.S. could rise somewhere between 3% and 5% in 2018, which is a normal increase.(5) The National Association of Realtors predicts that existing-home purchases will rise another 2.8% in 2018, to 5.8 million.(6)

If you’re thinking of buying a home in 2018, make sure you stay within your budget. Don’t purchase a house if the monthly payment is more than 25% of your take-home pay. And always get a 15-year fixed-rate mortgage. Don’t budge on either of these, or your dream home could stand in the way of your other financial goals, like saving for retirement or for your kids’ college.

Get in touch with one of our trusted real estate professionals if you are interested in buying or selling a house in 2018.

All of these economic indicators suggest a positive financial outlook for 2018. A growing economy is a great opportunity to keep your intensity and save every extra dollar you can for retirement.

But don’t forget about the big picture! If you try to keep your eyes glued to each twist and turn in the market, you’ll live in panic mode. You’ll never be able to relax and leave your investments alone. Remember, investing works best if you leave your money alone to let time and compound interest do their thing. Trying to time the market is a fool’s game. You have to keep a big-picture perspective.

Check out my new book Everyday Millionaires to read more about building wealth and retiring a millionaire.

Need More Investment Advice? Find a Pro!

I hope this information gives you more confidence about investing and the economy in 2018. But I’m guessing you probably have more questions for your particular situation. While I can’t speak into the specifics about your financial plan (I wish I could!), the good news is that you can sit down with a SmartVestor Pro in your area who can. These are the folks I use to help me with my own investments.

The new year is here—it’s time to get to work!

About Chris Hogan

Chris Hogan is a #1 national best-selling author, dynamic speaker and financial expert. For more than a decade, Hogan has served at Ramsey Solutions, spreading a message of hope to audiences across the country as a financial coach and Ramsey Personality. Hogan challenges and equips people to take control of their money and reach their financial goals, using The Chris Hogan Show, his national TV appearances, and live events across the nation. His second book, Everyday Millionaires: How Ordinary People Built Extraordinary Wealth—And How You Can Too is based on the largest study of net-worth millionaires ever conducted. You can follow Hogan on Twitter and Instagram at @ChrisHogan360 and online at or

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