December 30, 2017

5 Predictions for 2018

1. A robust, and roaring economy:  2017 already set an amazing foundation for the American economy, and therefore the world economy.  That synergy, combined with a new tax bill about to be passed will produce record levels of stock market performance, very strong economic growth and improved personal financial positions for millions of Americans.

Via Fortune magazine:
Looking back on the past year, 2017 may have been the year that the Federal Reserve achieved its “full employment” mandate with the unemployment rate at just 4.1%, the lowest level since December 2000. However, it remains to be seen whether the Federal Reserve can also achieve its second mandate of “price stability.” With inflation up just 1.6% year-on-year, the rate remains below the Fed’s desired target of 2.0%. While the Federal Reserve is projecting three additional rate hikes next year, it will largely be dependent on whether the inflation rate meets expectations. If inflation falls short of the Fed’s stated goals, it’s possible that the hikes will occur at a slower pace than projected. Either way, the financials sector looks poised to eventually benefit from higher rates and less strict regulation.
2. Absolutely no tangible progress from the Mueller probe: Just that.

3. A strong Republican performance in the 2018 midterm elections: Assuming point one holds true, and point two holds true, and the unsustainable level of vitriol and seething anger from the left leading to a petering out of voter enthusiasm on the left, the Republicans will not only hold their ground in the Senate and Congress. They will make some progress and experience some level of gain. It's too early to tell how big that will be but it's even possible that some of the young, impressionable Sanders voters might actually flip over to president Trump's column, or at least sit the election out as they reconsider their entrenched positions.

4. Web dominance: As early as 2018, web commerce will drive a huge number of brick and mortar stores out of the economy. Amazon will begin it's true eclipse of WalMart. Adapt or die will take on a serious level of urgency for small mom and pop shops as well as the WalMarts of the world. Interestingly Amazon might be forced to address anti-competitive concerns by the federal government as early as 2018 as well. How it shakes out is something that will extend beyond 2018 however. It's not clear what

5. Continued Acceleration of Learning Computers:  Recently a neural network, self-learning computer program beat IBM's super-chess program, at chess.  Over 100 games it won 28 games, lost 3 and tied the rest.  It did this by teaching itself chess strategy (having been given only the rules) by playing against itself thousands of times.

That's an impressive accomplishment and we won't see it out in the open but those sort of improvements will continue to accelerate throughout 2018.  McKinsey predicts millions of jobs will disappear over the next decade or so.  McKinsey's predictions should always be taken seriously.  In fact when combining the artificial intelligence self-learning technology combined with automation present an existential challenge to the continued economic growth point made in point one above.

While the economy is robust, there appears to be a fundamental shift in the need for labor.  While some are arguing for a guaranteed income the very notion seems Marxist, but even worse, implausible.  From where is that money supposed to come?  The argument over the next decade will become what to do with the growing millions of people who will not be able to find work.  That's the next big challenge to come.

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