The Trump Effect: US Companies Seen Investing More
$DIA, $SPY, $QQQ, $RUTX, $AAPL
US companies are seen investing more of the money saved from sweeping Trump tax cuts into businesses later this year, perhaps even surpassing a jump in Q-1 capital expenditure that was the highest in nearly 7 years.
Higher spending on technology, equipment and facilities could ease worries that S&P 500 companies have reached a peak in the profit growth investors are counting on to extend the 9-year Bull Market in stocks.
The increased spending in Q-1 follows significant cuts in corporate taxes approved late last year by the GOP-led Congress.
US companies also have been returning the tax cut windfall to shareholders via share buybacks and increased dividends at amounts never seen before, highlighted by Apple’s (NASDAQ:AAPL) $23.5-B repurchase in Q-1.
With data in from 94% of S&P 500 companies, Q-1 capital expenditures total $159-B, up more than 21% from a year ago and on track to be the highest Y-Y growth since Q-3 of Y 2011, according to S&P Dow Jones Indices data.
That has the potential to underpin revenue gains well into next year, strategists said. Moreover, additional spending could extend the growth cycle for earnings if it results in increased sales and operating efficiencies.
The Tax Cuts and Jobs Act passed in December is President Trump’s way to create more jobs, drive US economic growth and level the playing field with companies based outside the United States. It slashed the corporate income tax rate to 21% from 35% and charges multinationals a 1-time tax on profits held overseas.
HeffX-LTN’s US Stock Market Indexes Technical Analysis for the Week Ended 18 May 2018
Have a terrific weekend.