Over the past three days, our team of analysts has discussed its take on the major investment themes for 2018. They may not agree on everything, but there are three items on which they mostly agree:

• Rising oil prices will be a boon for the energy sector, but could be a drag on global economic growth.
• The Fed may have difficulty keeping interest rates low if inflation picks up steam.
• In addition to oil & gas, our experts have tagged metals, aerospace and healthcare among the top performing sectors next year.

If these predictions prove true, then we may be looking at a very different stock market in 2018 than what we experienced during the past year.

The big question hanging over the stock market for the past several months has finally been answered. President Trump got the corporate tax cut he wanted, so next year we’ll find out how much those savings end up helping the economy.

Now that Trump has racked up a big win on tax reform, he wants to use that momentum to energize his other pet project of rebuilding America’s aging infrastructure.

That may prove problematic since the tax bill is projected to increase the federal deficit by more than a trillion dollars over the next ten years. Adding a long list of construction projects to the expense side of the ledger might force the U.S. Treasury to borrow more money at higher interest rates.

If that occurs at the same time oil prices are heading up, then you have the recipe for rising inflation. And if that happens, then the Fed may feel it has no choice but to nip it in the bud by jacking up interest rates faster than its current “dot plot” suggests.

Is the Champagne Glass Half Empty or Half Full?

I am often asked, what brings a bull market to an end? The short answer is an economic recession.

That begs the follow-up question, what might induce a recession?

In a word, inflation.

Higher interest rates are harmful in many ways. Borrowing costs go up, so consumers spend less money. Prices also go up since the cost of materials rises with inflation, so consumers buy even less. And since consumers are spending less money, companies start cutting costs by laying off workers.

Stocks become less valuable since future earnings are discounted at a higher rate. Meanwhile, those future earnings estimates are reduced to reflect the slowdown in spending.

Obviously, none of us hope that is what is in store for us next year. Mostly, I just want you to know that we are aware of the risk and keeping a close eye on it.

Let’s not forget, there is also reason to be optimistic.

Assuming the corporate tax cut has its intended effect, then many working Americans should soon be enjoying higher wages. Bigger paychecks mean more consumer spending, which keeps the economy firing on all cylinders.

If the Fed can keep interest rates in check, then the “Goldilocks” scenario of rising economic growth, full employment and low inflation could propel the stock market to new highs.

As 2018 unfolds, you can count on us to keep you apprised of the risks and rewards to look out for. It won’t be easy, but it will be worthwhile.