BlackRock (BLK) is the world’s biggest asset manager, overseeing about $6 trillion in client money as of the end of November, and its investment decisions create ripples that roll through every major global market.
To give Fortune readers a preview of what the firm expects in 2018, BlackRock’s senior strategists shared their outlook with us in advance of its mid-December publication. Highlights follow from our conversations with the team. (Click here to read the full BlackRock 2018 outlook.)
The S&P 500 was up 19.5% for the year through November—and other global indexes set a pace that would be equally tough to match. BlackRock’s analysts think it’s likely that global economic growth will keep stocks rising, but not at the same hyperkinetic pace. In the U.S., the firm estimates that tax reform (assuming it passes) could raise GDP by 0.5% but doesn’t expect it to fuel enormous market gains. (That’s an opinion shared by Fortune editor-at-large Shawn Tully; see his analysis in “When Will the Profit Boom Fizzle?”)
Still, some U.S. sectors should have big years. Kate Moore, chief equity strategist, expects another strong showing for technology stocks, as more companies take advantage of a healthy economy to upgrade or overhaul the tech that drives their businesses. She’s also bullish on financials, particularly U.S. large-cap banks. “There are a lot of tailwinds and drivers for them in 2018,” she tells Fortune, including rising interest rates (which tend to boost bank profits), and a looser regulatory climate thanks to a Dodd-Frank–allergic Trump administration. U.S. banks are also poised to hike their dividends sharply next year, Moore points out, making them more attractive if and when stock price gains begin to slow.
Richard Turnill, BlackRock’s global chief investment strategist, thinks stocks in some foreign markets may outpace U.S. equities. Earnings in many emerging markets are on the rise, and central banks in Europe and Japan are expected to keep interest rates low in order to juice their own economies. He’s particularly bullish on Japan, where he thinks the Nikkei, up 16% so far this year, could do even better in 2018. Japanese businesses “are delivering double-digit earnings growth, and it’s sustainable,” says Turnill. “It’s not one and done.”
A version of this post appears in the Dec. 15, 2017 issue of Fortune, as part of the article “The Planet’s Biggest Investor Prepares for 2018.”