(Bloomberg Intelligence) -- Reflecting greater growth prospects after the U.S. tax overhaul, monetary policy appears set for a more hawkish tone in 2018. Increased market volatility may be the first sign of a sea change for stocks, while a divergence between the dollar and interest rates is also likely to alter equity-portfolio performance. As the year proceeds, it seems likely that new Federal Reserve Chair Jerome Powell will attempt to offset tighter policy by loosening the regulatory reins.
Equity-market valuations are likely to suffer with Fed tightening this year, but the outlook for 18% S&P 500 EPS growth in 2018 should more than offset the pressure on stock multiples. Among sectors, financials appears most likely to benefit from the new central-bank regime. (03/01/18)