Through the Looking Glass: The 2018 Outlook

Today’s economy is strengthening, backed by a resilient financial system. As we peer through the looking glass into 2018, we see opportunity to further bolster economic growth.

The capital markets fuel the U.S. economy, providing 65% of funding for economic activity. Today, GDP growth is slowly starting to pick up and the financial system is strong.

Capital markets fund 65% of U.S. economic activity

And yet, the U.S. economy has experienced the slowest economic recovery of the post-war period. Real gross domestic product stands at only 112% of the 2007 level, and the economy has been stuck in low gear.


The financial system has absorbed hundreds of new regulations in the decade since the financial crisis. While many of those regulations have made the financial system safer and more resilient, they are not without cost. To meet these requirements, financial institutions have built up excess capital and liquidity. Liquidity is up 4x for the CCAR banks since 2006. This is exaggerated for the G-SIBs, those exposed to a longer list of regulations given their increased complexity and size, with liquidity up almost 5x. This is excess liquidity that remains trapped in the system. We wonder how much stronger the economy could be if financial institutions had the flexibility to release more of this excess capital and liquidity into the economy.

The U.S. capital markets are deep and mature, and the financial industry that provides access to them is subject to robust and ever-growing regulatory oversight. In response to the Presidential Executive Order on Core Principles for Regulating the United States Financial System, the U.S. Department of the Treasury has undertaken a comprehensive review of this complex regulatory infrastructure – including prudential and capital markets frameworks – to ensure policies promote growth, job creation, investment and financial stability.


“Now that the U.S. financial system is significantly stronger and more resilient than it was in 2008, and especially in light of the slow recovery, it is time for policymakers to pause and take stock of which regulations work and which do not to rebalance their approach to financial regulation.”

Rebalancing the Financial Regulatory Landscape, May 2017


With over a 100-year history of substantive contributions to the policymaking and regulatory process, SIFMA works on issues critical to the industry’s ability to facilitate the development of and access to the capital markets. SIFMA’s annual State of the Industry media briefing highlighted the industry’s viewpoints on key issues. These viewpoints represent the consensus of more than 13,000 on-the ground personnel from several hundred SIFMA member firms.

For more, please download SIFMA’s 2018 Outlook, “Through the Looking Glass: Trends in the Capital Markets.”