5 Financial Predictions for 2018
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"By the end of 2018, the best savings accounts will yield about 2.3 percent, and the top five-year CDs should be just over 3 percent."

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From tax reform and double-digit stock market returns to big corporate mergers, last year was an eventful one for our money. Can we expect the same in 2018?

Here are five likely trends that could affect our wallets this year.

1. Stocks will continue marching up, but at a slower rate.

Stocks were on a tear in 2017, and, so far, the trend’s continued. On January 17, the Dow Jones industrial average—one of the most-watched market indexes, containing stocks from 30 big companies—surpassed 26,000 for the first time. (For context, this time last year, we were celebrating 20,000.)

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But all good things must come to an end—and many analysts expect the return of normal market volatility in 2018. “Interest rates are continuing to rise, and the U.S. government starts an aggressive fiscal stimulus program in the form of tax cuts,” says Certified Financial Planner Leslie Thompson. “Higher interest rates compete with the equity markets for capital,” which could slow down market growth.

So what should we do? Just focus on keeping our emotions in check, and avoiding knee-jerk reactions to any bumpiness. “Market volatility has been absent for over a year, so [any pullback] may feel worse than what it is: a normal market occurrence,” Thompson says.

2. We’ll pay more for debt, but get paid for saving.

If the Federal Reserve announces three interest-rate hikes this year, as expected, variable-rate debt will get more expensive to maintain—meaning now’s the time to double-down on paying off any big balances. By year’s end, Greg McBride, chief financial analyst at Bankrate, expects the average credit card interest rate to hit 17.15 percent (up from November 2017’s 16.15 percent).

Raising rates should benefit savers, though. “By the end of 2018, the best savings accounts will yield about 2.3 percent, and the top five-year CDs should be just over 3 percent,” McBride predicts. Currently, top savings accounts are offering about 1.5 percent, while five-year CDs offer around 2.5 percent.

3. We’ll pay less in taxes (for now).

As you’re probably well-aware, Congress Republicans passed new tax laws in the last days of 2017. As a result, it’s estimated that the average American will save between $500 to $1,800 on their 2018 tax bill.

In addition to new tax brackets, we’ll also see a substantial increase in the standard deduction—from $6,350 to $12,000 for individuals and $12,700 to $24,000 for married couples filing jointly. (As it stands, both provisions expire after 2025.) If you’re accustomed to saving receipts and itemizing deductions, it may no longer make sense to go through the hassle. You can simply take the standard deduction and forget the extra filing.

4. Wages will grow—modestly.

Low unemployment usually means higher wages, as employers raise salaries to attract more workers. But that hasn’t been the case in the current job market, and experts predict that wage growth will hold steady at around 3 percent.

One explanation is that companies are handing out lopsided pay bumps, and increasingly favoring top performers. Here’s how to make your case for a bigger salary bump.

5. Cryptocurrencies will have an eventful year.

Virtual currencies like Bitcoin have dominated financial headlines for months. For a while, it was all about their explosive growth; more recently, it’s centered around some heart-stopping plummets in value.

Yet the public has proven to have a strong stomach for these huge swings, which Thompson predicts we’ll see more of in 2018. “Cryptocurrencies are [probably experiencing] a bubble, but like all bubbles, it’s difficult to predict when they will pop,” she says.

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