There is plenty of optimism surrounding the global economy. The Eurozone’s surprise recovery in 2017 has created confidence for the year ahead, and even Mr Draghi, the President of the European Central Bank (ECB), signed off the year with a more optimistic outlook. In fact, the IMF think economic growth in the Eurozone will reach 2.2% this year, its best performance in a decade and in stark contrast to their forecast for growth in the UK of 1.5%. Meanwhile, the economies in France, Germany and Spain are starting to pick up pace.
Over the pond, The Federal Reserve increased the benchmark interest rate in the United States by 0.25% to a range between 1.25% and 1.5% in December, the third hike in a year. The US economy is also expected to put in a strong performance with growth forecast at 2.7% in 2018, partly thanks to Trump’s tax cuts and also the expectation for unemployment to fall below 4%.
All the excitement overseas has contributed to the UK’s FTSE 100 reaching a record in January. The FTSE 100 is the share index of the top 100 companies listed on the London Stock Exchange and is often seen as an indicator of prosperity and confidence in the UK economy. The FTSE 100 has partly been boosted by cheap money from the Bank of England which has helped inflate asset prices, but low interest rates have also pushed investors into riskier assets in the search of higher returns.
However, a lot of the companies in the FTSE 100 are big international companies who earn their money in foreign currencies, so the weak pound has helped boost their earnings further. Therefore, the index isn’t necessarily the best indicator for the performance of the UK economy, but it helps. With global growth predicted to rise in 2018, driven by the Eurozone and emerging economies, it’s likely we’ll continue to see headlines about index records being set over the next year.