Capital Markets: Observations & Insights

Business Spending to Accelerate Further ​ The Longest Expansion

• Drivers of faster growth in 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

2Q19

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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