The financial landscape is evolving on multiple fronts, creating new considerations for consumers and investors. PNC offers perspectives on two distinct areas shaping today’s environment and what they may mean for the risks and opportunities ahead:

  • U.S. economic growth and the path of interest rates; and
  • Private credit’s growth and implications for risk trends.

What’s happening in the economy?

The economy remains resilient despite stubborn inflation and international conflicts driving up the price of gas. More specifically:

  • Consumer spending remains strong. Even with elevated fuel prices and higher interest rates, consumers continue to spend, including on discretionary purchases. 
  • Lower-income households spending growth has improved in 2026, closing the gap with higher-income households.
  • AI-related capex continues to be an important driver of growth. The AI investment boom is likely to be one of the largest capex cycles in history, providing a substantial tailwind to domestic demand and growth.
  • Inflation remains above the Federal Reserve's (the Fed) 2% target and has moved in the wrong direction in 2026.
  • A stable labor market allows the Fed to focus on inflation. Job growth has improved and the unemployment rate has fallen in 2026, giving the Fed room to raise interest rates to bring inflation under control.
  • The Fed is expected to continue raising interest rates, with 25-basis-point increases in diciembre de 2026 and marzo de 2027.

Private Credit: Fast Growth, Few Defaults (so far) 

Private credit has grown to a market size of $1.5 trillion in the U.S.[1] , about the same as the high yield bond market and the broadly syndicated loan market. However, it is growing exceptionally fast - an annual rate of around 15% per year[2] in recent years. Its growth has been supported by increasing participation from insurers, pensions, family offices, and high-net-worth investors.

As assets under management increased, private credit firms expanded their loan origination channels through partnerships with traditional commercial banks, expansion into asset-backed finance, and more recently, growing participation in financing the AI infrastructure buildout. Together, these trends indicate that private credit is becoming an increasingly important component of credit intermediation in the U.S. with implications for both corporates and investors.

Private credit’s growth has been accompanied by a flurry of headlines and questions about potential risks and the impact of a downturn on the broader financial system. Concerns include a loosening of underwriting discipline in parts of the market, a growth in more opaque and illiquid investments on insurer balance sheets, exposure to software lending combined with an approaching maturity wall, and several quarters of elevated redemption requests from investment vehicles that cater to high-net-worth investors.

The growth of AI infrastructure financing combined with the use of highly complex funding structures adds to potential concerns. As the sector grows over time and interconnectedness with other parts of the financial markets increases, these risks will bear close watching.

Notwithstanding these potential concerns, reported default rates have remained low so far. While it is reasonable to expect an increase in losses as a prolonged period of higher interest rates puts pressure on companies with highly levered balance sheets, and the impacts of AI disruption are still to be seen, PNC feels that private credit currently lacks the scale and risk transmission channels that typically characterize systemic risk.

In PNC’s view, private credit loans are primarily funded by long-term stable sources of capital, and leverage use at the fund level is generally modest, which limits the potential for transmission of risk to parts of the financial system less suited to bear it.

Please visit PNC Economics Research for the bank’s latest reports on trends shaping the economy.