Capital Markets: Observations & Insights
Business Spending to Accelerate Further Fundamentals
• Drivers of faster corporate expenditures include:
‒ Strong profit growth
‒ Tax reform—lower statutory rates, foreign profit repatriation, accelerated depreciation
‒ Higher business confidence—driven in part by lower regulation and certainty about taxes
‒ Accommodative financial conditions—banks’ willingness to lend and low credit spreads
Business Spending
15%
Robust earnings growth should help drive an acceleration in business spending
10%
5%
0%
Y-ear-Over-Year Growth
-5%
1Q16
2Q16
3Q16
4Q16
1Q17
2Q17
3Q17
4Q17
1Q18
2Q18
3Q18
4Q18
1Q19
Source:FactSet. Business spending is U.S. private fixed nonresidential investment with estimates (dotted line) based on a regression with S&P 500 EPS.
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