The past year was a great one for financial assets, with most asset classes giving strong positive returns. Equities globally were up almost 25 per cent, led by emerging market stocks which rose 38 per cent in dollars, and even bonds and treasuries delivered positive real returns. All commodities except agricultural delivered strong returns as well, led by the industrial metals which were up by 29 per cent.

We are currently in a sweet spot for financial assets, with global growth strong and synchronous and monetary conditions remaining benign. Both corporate and consumer confidence are surging and most leading indicators of economic activity show continued strength.

The number one issue that comes to mind is the threat of inflation. Undoubtedly most structural trends, be it digitalisation, the onset of artificial intelligence and robotics, and demographics, all point towards continued deflationary tendencies across the globe.

We also have oil prices surging, nearing $70 on Brent, combined with copper and other metals also rising by 20-25 per cent. There has also been a general lack of investment across the globe for the past few years, which is now showing up in utilisation rates.

As for India, we need to worry about corporate earnings. This is the year when earnings need to deliver. Multiples have no room to expand further. Interest rates have bottomed, the macro on the margin is deteriorating. It is earnings which matter now. The delivery of earnings or lack of by corporate entities will determine what markets do in 2018.

For Full article please refer link : http://www.business-standard.com/article/opinion/issuesto-ponder-over-in-2018-118010801328_1.html