Kuwait: January 14, 2018
INTERNATIONAL: GLOBAL ECONOMY KICKS OFF 2018 IN STRONG FORM, THOUGH RISKS REMAIN
The global economy entered 2018 in strong form, with several major economies experiencing solid improvement in activity in recent months. Tax cuts in the US promise to give further impetus to an economy that had already been performing well. In the eurozone, the recovery continued to appear robust, with data surprising to the upside. Japan, too, has seen positive developments, while China and other emerging market economies have maintained steady or improving outlooks. In this environment, equities have continued to do well, with indices hitting new highs. Meanwhile, inflation has remained subdued across the board, something that could slow the pace of monetary policy normalization in advanced economies.
Global equities continued their positive streak throughout 2017, posting a gain of 1.5% in December and 21.6% for the year, as measured by the MSCI All Country World Index. US equities also ended the month in the green 1.0% and 1.8% as measured by the S&P 500 and Dow Jones respectively, in addition to registering gains of 19.4% and 25.1% for the year. This month US equities benefited from President Trump’s tax reform law and its potential impact on corporate earnings, which was signed in late December to take effect in 2018. In other political news, lawmakers passed another stopgap spending bill, which prevented a government shutdown and permits them to operate through mid January 2018. In their December meeting, the Fed did increase the federal funds rate target by 0.25%, as markets had anticipated, to 1.25-1.50% with the expectation set for three hikes in 2018.