What Financial Experts Are Watching in the Market Heading Into 2027
Investors heading into 2027 have plenty of economic crosscurrents to follow, from stubborn inflation and elevated borrowing costs to enormous spending on artificial intelligence. Rather than trying to predict exactly where stocks are headed next, financial experts are keeping an eye on a handful of indicators that could offer clues about the economy and markets.
Here’s what they’re watching.
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1. Inflation and Interest Rates
Inflation remains one of the biggest variables heading into 2027 because it can influence interest rates, borrowing costs and the performance of different types of investments. Tim Thomas, a chartered financial analyst (CFA) and wealth manager at Badgley Phelps Wealth Managers, said inflation is one of two “critically important indicators” he’ll be monitoring.
If inflation does not rise as much as feared, the Federal Reserve is likely to raise rates one or possibly two, more times.
“Those hikes would essentially reverse the three rate cuts that were completed in the fourth quarter of last year,” he said. That could “drive equity prices more than changes in monetary policy.”
A sustained series of rate hikes, on the other hand, could be problematic for equity investors. Markets tend to struggle if rates rise quickly or increase significantly over a long period.
“In those instances, the odds of a credit crunch and subsequent recession increase,” Thomas said.
Ryan Petti, a certified financial planner (CFP) and retirement planner at Sentinel Group, is paying attention to energy prices as an inflation signal, specifically growth stocks.
Put simply, high energy prices can keep inflation elevated because energy costs affect everything from transportation to the cost of producing and delivering goods. If inflation stays stubborn, interest rates could remain higher, which can put pressure on growth stocks. If inflation eases, growth stocks, housing and smaller companies could get some breathing room.
2. The 10-Year Treasury Yield and Borrowing Costs
Ernie Wingard, a financial advisor at Capital Choice Financial Group, singled out the 10-year Treasury yield as an important indicator. Its movements can ripple through borrowing costs and affect everything from corporate expansion to mortgage affordability.
Wingard connected 10-year Treasury yields more directly to consumers.
“If borrowing rates stay cheap, then more expansion could be on the horizon," he said. "If Treasury yields begin to increase, then your borrowing rates start to go up.”
In a nutshell, that could have an adverse effect on jobs and mortgage rates and could make homes less affordable.
3. Whether the AI Boom Can Keep Delivering
AI has become important enough that experts are watching how much major companies continue spending on AI infrastructure and whether that spending translates into earnings. A slowdown in investment or weaker-than-expected performance could become an important market signal.
"Given the size of these investments, AI-related capital expenditures have become a key driver of the economy and the earnings growth we have enjoyed during this bull market,” Thomas said.
Since profits are expected to rise more than 10% next year, he thinks “the growth momentum can be sustained.” Although higher interest rates may also slow down the economic growth in technology and AI.
4. Your Own Portfolio May Matter More Than Any Prediction
For everyday investors, watching market indicators doesn’t mean trying to predict every market move. Heading into 2027 could instead be a useful time to check whether your portfolio still reflects your goals, time horizon and risk tolerance.
Petti said investors need to learn to block out the “noise” in the short term, and “take emotion out of investing, and let the market do its thing.”
So long as they have a plan, most investors should be able to ride out some market volatility. What matters most, Wingard said, is “consistency, proper allocation and proper rebalancing when it comes to their portfolio.”
Editor’s note: Investing involves risk, including the possible loss of principal. Always consider your individual circumstances and consult with a qualified financial advisor before making investment decisions.
This article was provided by MoneyLion.com for informational purposes only and should not be construed as financial, legal or tax advice.
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