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Actions could disappoint investors in 2018, says Manulife asset Management

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January 5, 2018 11:30

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Despite low market volatility, which could continue in 2018, several risks are such that investors could be disappointed by the actions of the next year, say experts from Manulife asset Management.

A possible increase in costs, an unanticipated response of the markets to the measures taken by the federal Reserve, even as the geopolitical tensions that continue to exist could have a negative influence on the profits of u.s. companies, says Bob Boyda, manager, capital markets and strategy at Manulife asset Management.

«If profit margins are reduced due to the pressure resulting from the increase in wage costs, interest costs and possible increases in costs in areas such as energy — and that the shares were valued based on an ideal environment, investors may be disappointed «, he adds.

The uncertainty about NAFTA weigh

The risk that the United States will unilaterally withdraw from the free trade Agreement north american (NAFTA), which would mean a return to the rules of theworld trade Organization (WTO), and interrupts the immediate of trade, would have an effect on the actions.

«It is quite possible that the companies pass on the increases in costs to consumers, which would contribute to a rise in inflation in the United States and an appreciation of the u.s. dollar,» says Megan Greene, chief economist at Manulife asset Management.

«It is also possible that the United States choose not to withdraw from NAFTA and clear manner that they create rather an intermediate solution that is difficult and uncertain. In this case, it could result in a series of legal proceedings, not only about the way in which the United States could withdraw from NAFTA (the logistics), but companies could decide to sue the government because of that agreement ambiguous. «

Tax reform a bit challenging

In addition, the reform u.s. tax proposed by the administration could not make progress in the u.s. economy, » says dr. Greene. She said that the project would have rather had to wear on corporate tax only on the income tax. In addition, the manner in which the project is structured and financed, the economic growth would deviate from the growth rate of the projected GDP, about 2 %.

«More importantly,» continues Megan Greene, bill the tax will increase the burden of the public debt. Not only this will be a brake on growth in the medium and long term, but measures should be taken to address it — including a possible tax increase. «

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