The Latest Eulogy for Corporate Profits Is Premature

Contributing sentiments towards policy:

55% : Here's a table from Smolyanksy's work that helps illustrate the point: Real annual EPS growth for nonfinancial S&P 500 companies from 1989-2019 was 3.8%, yet EBIT -- earnings before interest and taxes -- grew by only 2.2%, less than real GDP.
52% : In short, it's largely about taxes and interest.
51% : Taxes and interest rates have fueled the recent outperformance of company earnings over GDP.
48% : Smolyansky may well be right about interest rates and taxes, but who's to say that something else won't happen to offset them -- a change even more momentous like the return of productivity growth as a driver of sustainably faster GDP expansion?
45% : 3 In it, Smolyansky deconstructs some six decades of S&P 500 returns and profits into contributions from falling interest rates; declining effective tax rates; rising earnings before interest and taxes (operating profits); and expanding price-earnings multiples.

*Our bias meter rating uses data science including sentiment analysis, machine learning and our proprietary algorithm for determining biases in news articles. Bias scores are on a scale of -100% to 100% with higher negative scores being more liberal and higher positive scores being more conservative, and 0% being neutral. The rating is an independent analysis and is not affiliated nor sponsored by the news source or any other organization.