Markets have begun the year with equities extending their record-breaking pace, while Treasuries and the dollar have come under pressure. However, despite these developments, it is worthwhile considering five out-of-consensus scenarios that could emerge in 2018.
1. Treasury yields fall
Most analysts expect US government bond yields to edge higher, with the 10-year yield ending 2018 at 2.9 per cent. Some think this is complacent, given the strong economy and the Federal Reserve’s plans to raise rates three times. Moreover, the debt-financed tax cut means investors will have to absorb $1tn of Treasuries in 2018, twice the amount last year, according to Deutsche Bank’s Torsten Slok.
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