Wall Street expects to keep rising in 2018

Wall Street is expected to keep rising in 2018 because a massive drop in the corporate tax rate is seen boosting the economy and corporate profits.

The US stocks is on track to mark its ninth birthday in March, with the S&P 500 climbing 20 per cent for 2017 - its biggest increase since 2013, reports Reuters.

The drop in the corporate tax rate in 2018, to 21 per cent from 35 per cent, is seen by many as the biggest factor for the stock market next year.

Yet 2018 share gains are expected to be smaller than 2017 with the S&P 500’s price/earnings ratio - a measure of stock prices against expected profits - is around its highest level since June 2002.

Many on Wall Street cite potential pitfalls even though they see no signs of a recession.

Some say the tax bill’s benefit will be short lived.

Several strategists cite the risk that faster economic growth could cause inflation to increase at a pace that would lead the US Federal Reserve to raise interest rates faster than expected.

The Citi Economic Surprise index was at 77 on Thursday, not far from its almost six-year high of 84.5 reached on Dec. 22.

The S&P 500 rises on average 1.3 per cent in the so-called Santa Clause rally - the period between Dec. 22 and Jan. 3 - according to Hirsch. This year, five days in, the S&P has risen just 0.1 per cent.