The staff of Fortune is assembling its predictions for 2017 in our annual feature, the Fortune Crystal Ball, now on newsstands in the December 1 issue of the magazine. Here are some of our forecasts.
2,073: Where the S&P 500 will finish in 2017
U.S. stock markets got darn near euphoric after the presidential election, as investors anticipated that tax cuts and stimulus spending under a Donald Trump administration would mean good news for corporate profits.
But expect the rally to collide with reality in 2017, as overall earnings growth remains slow and rising interest rates stoke shareholders’ anxiety. A post-election crowdsourcing survey of about 100 analysts by New York research firm Estimize predicts that the S&P 500 will finish the year at 2,217. That’s only 3.5% higher than where it closed on Election Day.
1.25%: The federal funds rate at the end of 2017
The Federal Reserve spent much of 2016 hinting that it wanted to raise rates. Now, Janet Yellen and Co. have a president-elect whose economic agenda may prove to be inflationary. The economy won’t justify huge rate hikes, but we can expect three quarter-point increases between now and next Thanksgiving.
U.S. GDP growth will break 2%
International agencies are signaling an upbeat message for U.S. GDP growth in 2017, with the OECD, the IMF, and the Economist Intelligence Unit all forecasting 2.2% growth or more—up from a projected 1.6% in 2016. Some banks have taken a more dour tone about the forecast, but with wages rising and unemployment low, there’s reason for a little optimism.
Oil will cost $50 a barrel next year
The Energy Information Administration says the price of oil will tick upward in 2017, to $50 a barrel from the current $45. Others expect a bigger jump—Merrill Lynch, for example, projects the price will hit $69 by summer. We think OPEC will opt to keep production high, and thus prices lower. But either way, gas will get a little more dear.
Homebuilders will rise from the dead
Home prices have risen relentlessly of late—the S&P/Case-Shiller index is up 37% since 2012—but homebuilders have not kept pace with demand, as inventory for sale has fallen 9% over that time. With wages rising and unemployment low, 2017 will be the year builders finally start building in earnest again.