There are many reasons to fear developments that may come in 2018. As of the first week of December, the total value of companies listed on the global stock markets was "within touching distance of $100 trillion" for the very first time. This number embodies the post-surge world equity market capitalization, which has seen a drop in price swings. 2017 was the first time that the 60-day volatility for stocks dipped below that of bonds, and on occasion, parts of the bond market even looked "troublesomely bubble-like." Ever since 2017, many governments in the Euro Zone can borrow at a lower cost than the European Central Bank's deposit rate (-0.40%), thanks to sub-zero two-year Euro Zone government bonds.
Furthermore, yields are moving even lower as the ECB purchases more bonds to "expand its balance sheet." In America, the U.S. yield curve has flattened, a sign of meager returns, which is cause for worry for some bond investors. Money is going into corporate bonds instead, with corporate inflows at record-setting levels by the end of 2017. When non-investment grade European debt dipped briefly below U.S. 10-year Treasury yields in August 2017, investors scrambled to purchase them, but their yields remain meager.
The effects of the GOP tax bill will also threaten the wellbeing of homeowners, given the new limitation on deducting mortgage interest rates. The tax bill will also cause interest rates and mortgage costs to rise by adding to the deficit. Wall Street analysts are wary of the foundational health of the housing market as a whole, but investors have not yet responded to the signs of potential negative change in the homeowning market, as stocks of residential builders, NVR Inc. (BMV: NVR), and KB Home
The Bitcoin bubble is one final reason for pessimism in 2018. According to new data, in spite of many investors' warnings about the Bitcoin bubble, the number of times the term "bubble" has appeared in articles on the subject has not risen correspondingly, suggesting a lack of seriousness in the public's attitude towards the potential threat of a burst. Other commentators debate the idea that Bitcoin is a bubble based solely on speculation by noting that if people are using Bitcoin, then it should be worth more. In theory, with increased transactions of Bitcoin should come a higher value. The problem then becomes whether it's actually the massive increase in the price of Bitcoin that has driven up the transaction rate, as opposed to treating Bitcoin as a currency to purchase goods and services. Some experts can agree that Bitcoin's status as a bubble may be determined through the following means: if transactions remain high even as the price of bitcoin drops, then Bitcoin's enormous price rise is backed with substance; if not, then Bitcoin is a bubble. If so, then bulls on Bitcoin hope that those investors who became involved in the cryptocurrency during its period of accelerating price rises will now stay and become actual users of Bitcoin. If so, their presence in the form of consistent transactions will help solidify Bitcoin's presence as a more permanent digital currency.
