What’s Next for U.S. Markets?

After eight years of economic expansion, PNC economic and investment experts share what they see on the horizon for the economy and U.S markets.

The U.S. economy is in the “seventh inning” of a potentially record-long expansion. After 97 months of slow but steady growth, outperforming stock markets are overdue for a dip in momentum. And the push is on in Washington, D.C., to boost growth through tax reform and other measures.

PNC’s economic and investment experts offer insights in a PNC Perspectives on what’s ahead in the markets.

Reasons for Optimism

Now going on eight years, the U.S. economic expansion may break the longevity record at 10 years, if PNC’s economic forecast proves correct, according to Stuart Hoffman, senior economic advisor at PNC. “Economic expansions don’t die of old age; they die of infirmities that affect them over time,” he said, offering an optimistic forecast to clients.

Hoffman offered several reasons for his sunny outlook on economic growth, bolstered by the “American spirit to rebuild their lives and livelihoods” after weathering back-to-back Category 4 hurricanes in the same year for the first time in history. Other reasons for optimism include:

  • Stable oil prices
  • “Relatively tame” inflation, below the Fed’s 2 percent target
  • Only very gradual Fed rate hikes and balance-sheet shrinkage
  • Fiscal stimulus, in the form of tax reform and financial deregulation, forecast for next year (more on that below)
  • Financially strong consumers and businesses
  • Solid global economic growth, which helps U.S. exports

“The economic expansion still has some life and a number of innings to go,” Hoffman noted.

It’s a good backdrop for positive corporate earnings and value in the stock market.

Financial Markets: Volatility Overdue

While some may believe stocks are overvalued, Chief Investment Strategist Bill Stone countered with PNC’s stance that stocks aren’t overpriced or expensive; they’re fairly valued. However, he cautioned clients not to be surprised if they see more variation in the markets.

“We haven’t seen much volatility, and we’ve gone much longer than normal since we’ve had a 5 percent pullback,” Stone said, noting the S&P 500 and NASDAQ are up 11 percent and 20 percent, respectively, so far this year.

Upcoming fiscal policy actions and unforeseen geopolitical events could spark stock market swings, but that’s not a reason to run away from stocks, he said. “Some level of volatility is normal,” Stone added.

Knowing that these things can and will happen, it’s important to position your investment portfolio to rise through them.

See more economic reports from PNC  »

Stu Hoffman
Stuart Hoffman is PNC’s senior economic advisor
Bill Stone
Bill Stone is PNC’s chief investment officer