Bull market still has room to run in 2018

The 8-year-old Bull market should continue to offer an attractive ride for equity investors this year, provided interest rates and inflation stay in check and there are no major international disruptions, a top investment strategist for Synovus Bank told Chattnaooga business leaders Tuesday.

“If the right conditions stay in place, there is no reason we can’t do another 10 to 12 percent [gain] this year,” said Gary Fullam, chief investment officer for GLOBALT Investments, a division of Synovus Trust Co. that provides money management advice to institutional and individual investors. “In the environment we have been in with slower growth and low inflation, the Nasdaq names have led this market from the very bottom and normally in a bull market what has led the market leads until it’s over.”

Fullam, a Chattanooga native who previously was a trust officer at the former American National Bank in Chattanooga before moving to Atlanta with GLOBALT Investments, doesn’t expect the upturn in stocks to end anytime soon. But Fullam said the volatility of the market could increase in 2018 compared with the steady and consistent upturn in stocks throughout last year when U.S. stocks gained more than 21 percent and stocks in emerging international markets were up by more than 36 percent.

Since the 2009 recession, which followed a decade of stagnant or declining stock prices, the Dow Jones Industrial Average has more than tripled. The rise in stock prices since 2009 represents the third biggest bull market for appreciation and the second longest in U.S. history.

“We know that this market upturn is long in the tooth by historical standards,” Fullam said. “But the fact that we came screaming out of that hole [in 2009] does not mean that the ride is necessarily over and from a secular basis the market still has significant room to run.”

In his 2018 economic outlook, Fullam said it will be tough to meet the ambitious talk from President Donald Trump of economic growth of 4 percent of more. With the labor force growing at a meager 0.25 percent a year, productivity will have to jump to escalate Gross Domestic Product (GDP) growth much above the 2 to 2.5 percent pattern of the past decade, Fullam said.

The tax reform package approved by Congress last month should spur more capital investment to boost productivity and more artificial intelligence and factory automation may spark major productivity gains in some industries, Fullam said. But rising debt levels and tightening by central banks around the globe threaten to push up interest rates, which have been on a 37-year decline through last year.

Higher interest rates will likely both retard new investment and encourage more investors to switch from equities to bonds in their portfolios.

At the least, Fullam said investors should expect a bit more volatility this year in the market, even if prices continue to rise over time. Last year was the first time in history the market did not decrease by 3 percent or more anytime during the entire year.

“In any year, it is normal to have two or three 5 percent corrections (or downturns from the peak) and it is quite normal to have one or two 10 percent corrections,” Fullam said. “There was a very, very smooth ride to this market last year and we all feel like it may be time for the pause that refreshes.”

Contact Dave Flessner at dflessner@timesfree press. com or at 423-757-6340.