Guest Articles & White Papers

The Case for Optimism: Outlook for Continuing Economic Growth

April 2, 2018

By Sal (Kislay) Shah, CPA, Crowe Horwath: Despite some recent volatility in U.S. markets, investors in both public and privately held companies have considerable cause for continued optimism. Obviously, not every venture or investment will succeed, but the overall economic picture remains positive in the long term.

The Broad View: A Positive Environment

Without venturing into a detailed economic analysis, it is safe to say the overall global economy has established a long-term growth pattern in recent years, with the U.S. economy in particular demonstrating a solid and encouraging upward trend.

More specifically, U.S. equity markets had reached record highs before recently experiencing what some analysts have suggested was an inevitable correction. Among the most closely watched factors affecting market values are interest rates, inflation, and overall monetary policy. So far, market trends seem to suggest the economy will be able to absorb, with only temporary fluctuations, the effects of the Federal Reserve’s (Fed’s) expected gradual increases in interest rates.

It is true that higher interest rates decrease the amount of capital companies have available for investment while lowering consumers’ disposable income at the same time. Nevertheless, coming off an extended period of extremely low interest rates, it seems reasonable to expect that the relatively modest increases being discussed will not have a significant or lasting negative impact on long-term economic growth.

Some market analysts believe another way for the Fed to increase interest rates is to unload the $4.5 trillion bonds and securities it holds. Market participants are nervous, however, about the impact of such a sale or even a portion of such a sale on the U.S. economy and the capital markets.

The Fed also has a new chair, Jerome Powell, who replaced largely popular Janet Yellen. Powell is expected to continue to follow calculated policies of his predecessor, but his intentions in this role are still unknown, which might be contributing to the market volatility.

Another significant factor affecting economic activity is U.S. tax policy. Volumes already have been written about the positive effects of the recent reform known as the 2017 Tax Cuts and Jobs Act, so there is no need to recount them in detail here. It is worth noting, however, that in addition to increasing the funds U.S. companies have available for investment and expansion, the act also has encouraged some companies to offer various combinations of employee bonuses and pay raises, which in turn provides additional economic stimulus.

The jitters the market demonstrated in early February reflected investor sentiments that over stimulus and overheating could lead to inflation and additional interest rate increases. U.S. markets now also are responding to newly imposed trade tariffs. On the other hand, some economists contend that existing slack in the labor market would help ease additional pressures. The U.S. economy continues to be the home of innovation, attracting global talent. A vast majority of global corporations is based in or has a presence in the United States, and U.S. public stock and private markets continue to be among the world’s largest sources of capital.

Large as these markets are, they also are among the world’s most receptive, transparent, and efficient, with global economic, political, and environmental events all funneling through them. In the current technological age, when most capital markets are interconnected, U.S. markets quickly reflect events in diverse other markets, including the United Kingdom, Germany, Japan, Hong Kong, and Latin America.

Taking this broader view, the good news for U.S. businesses, in general, can be perceived as part of a global growth pattern, as other leading markets in Europe and Asia also give off positive signals.1 Nevertheless, currency, trade, and interest rate policies are ongoing areas of risk, particularly in view of some countries’ extensive investment in U.S. Treasurys.

These concerns are reflected in some economists’ continued expressions of concern about the long-term sustainability of the U.S. national debt. It is worth remembering, however, that such warnings have been sounded many times in the past, and dramatic changes in economic conditions consistently have overcome the concerns as deficits eventually stabilized.

Ultimately, there currently are no strong indicators that suggest the global economy is likely to fall back into a negative growth pattern in the foreseeable future. Taking into account all the various factors just mentioned – and once again cautioning that this is by no means a studied economic analysis – it seems reasonable to expect the U.S. economy could experience an average annual gross domestic product growth rate of 3.5 percent or higher going forward.

A Closer View: Interesting Sectors to Watch

Looking beyond the good news at the macro level, certain specific sectors of the economy offer particularly interesting possibilities. This is not to suggest that these sectors will experience the greatest success or that these necessarily are areas where investments are more likely to produce a positive return. Moreover, these certainly are not the only sectors worth watching in the coming years.

Nevertheless, the following are sectors where there are likely to be noteworthy developments – both good and bad – in terms of their contributions to overall economic trends.


The technology sector now drives much of the world’s economy and is likely to continue to do so. Perhaps the most obvious example of technology’s impact can be found in the fact that Apple, Microsoft, Amazon, and Google parent company Alphabet now are racing to become the first publicly traded U.S. company to surpass $1 trillion in market valuation, an event many observers predict will happen this year.

Looking beyond the public markets, there are likely to be numerous opportunities in private companies as well. As always, private investors must take care to make informed decisions. Not all technology ventures succeed, but the sector as a whole will continue to drive much of the world’s economic growth, while also spurring innovations in other segments of the economy.

One example of technology’s wide-ranging impact is in the field of artificial intelligence. Machine learning capabilities and advances in managing big data are helping to create previously unimaginable applications in strategic planning, marketing, and even day-to-day operations in all types of businesses, from manufacturing and distribution to banking and finance.


With an aging population, it is only logical that healthcare will play an increasingly important role in the U.S. economy over the long term. In the near term, rising costs and ongoing uncertainty over how healthcare costs are to be paid – and by whom – mean that the traditional healthcare sector will continue to generate both risks and opportunities for interested investors.

One prominent example is the recent announcement of plans by Amazon, Berkshire Hathaway, and JPMorgan Chase to form their own employee healthcare coverage plan. The concept is still in its very early stages, and there certainly are many unknowns and potential risks as nonhealthcare companies venture into this complex, unfamiliar, and costly arena. Yet the size and clout of the three participating companies virtually guarantees this proposal will be closely watched – and quite possibly imitated. It also could be seen as a harbinger of even more unexpected developments in healthcare in the future. The U.S. healthcare industry is a very large and sensitive subject – if the federal government does not provide answers, the private sector ultimately will find its own solutions.

It is important to remember, as well, that care delivery and payment systems represent only one aspect of the total healthcare sector. Significant – and in many cases lifesaving – medical discoveries continue to be announced, including promising new treatments for cancers and other historical killers. As was the case with technology, such advances will offer opportunities for investors. Recognizing and managing the associated risks will require industry experience and understanding, but overall, the sector promises to deliver some fascinating developments.

Real Estate and Infrastructure

Over the centuries, real estate often has been cited as the underlying foundation for all wealth, but in today’s economy, it is generally regarded as a lagging indicator of overall economic health. After weathering the recession and enduring several years of relatively slow growth, both the commercial and residential markets currently are enjoying a positive growth cycle. Spurred in part by continued moderate interest rates and increased activity by foreign investors, even this tried-and-true sector is generating signs of opportunity.

Once again, technology plays a large role in the opportunities presented in real estate. Software such as building information modeling and techniques such as modular, off-site assembly of prefabricated building components are streamlining construction – and enabling more efficient and intelligent buildings as well. The ability to engineer greater value for owners and occupants spells opportunity for investors who know and understand the real estate sector.

Meanwhile, recurring discussions of trillion-dollar infrastructure plans serve to highlight the long-term need for upgrades to the nation’s transportation, power, and communication systems. Often these discussions are accompanied by speculation regarding the role of public-private partnerships in financing such projects. Although public-private partnerships have their detractors, they could offer some opportunities for informed and careful investors.

New Frontiers

Unlike traditional economic sectors such as technology, healthcare, and real estate, this category of developments is less conventional. In fact, this category could be described as “long shots.” While prudent investors would not stake their entire future on them, their unconventionality in itself makes these opportunities interesting to consider.

One such sector is space exploration. Over the years, space exploration has created new markets and pioneered new types of technology that have changed lives and spurred economic growth. The list of breakthroughs stemming from the space program includes advances in health and medicine, public safety, lubricants, materials technology, and, of course, satellites, propellants, and computer technology, to name only a few.

What makes this sector particularly interesting now is the growing role that private industry is playing in space exploration. The new opportunities are not for everyone – after all, few investors have the resources or capabilities of Elon Musk at their disposal. Nevertheless, space exploration, and the private companies that support and contribute to it, promises to be an interesting segment to follow.

Even sectors that might be regarded as spurious or speculative can be instructive. For example, while most prudent investors probably are well-advised to be cautious of cryptocurrencies and similar highly speculative investments, such ventures might be able to offer some useful lessons into the use of advanced software solutions such as blockchain technology, as well as the efficient management and processing of huge amounts of data.

Investors should be excited about future growth in spheres such as space travel, efficient lighting systems, significantly reduced travel time, alternative energy, water purification systems, quantum computers, and many more. The list of potential opportunities is long.

Looking Ahead

Beyond the specifics, the larger message to investors is even more important: Current indicators point to continued growth in both the U.S. and global economies of the near- and long-term. While it is prudent to remain alert to any indicators that the positive trends might begin reversing, today’s investors should be primarily alert to opportunities in those areas where they have either direct experience or access to proven industry expertise.

1 Benn Steil and Benjamin Della Rocca, “Why the Stock Market Is Rising,” Foreign Affairs, Dec. 15, 2017,