PNC Experts: Sunny Outlook for Economic Growth

PITTSBURGH — After eight years of economic expansion, PNC economic and investment experts say the United States economy is in the “seventh inning” of a potentially record-long expansion.

In a post published Thursday on the bank’s website, Stuart Hoffman, PNC senior economic adviser, and Bill Stone, PNC chief investment officer,  note the economy has achieved 97 months of slow but steady growth. Still, they say, 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.

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 Hoffman.

“Economic expansions don’t die of old age; they die of infirmities that affect them over time,” he explains, and offers an optimistic forecast to clients.

Hoffman cites several reasons for his sunny outlook on economic growth, bolstered by what he calls 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 he is optimistic include:

• Stable oil prices.
• “Relatively tame” inflation, below the Fed’s 2% 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.
• 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 says.

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

While some may believe stocks are overvalued, Stone affirms PNC’s stance that stocks aren’t overpriced or expensive; they’re fairly valued. However, he cautions 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% pullback,” Stone says, noting the S&P 500 and Nasdaq are up 11% and 20%, 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, Stone says. “Some level of volatility is normal.”

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

SOURCE: The PNC Financial Services Group Inc.