One of the Trump administration’s major accomplishments was corporate tax reform. U.S. presidential candidate Joe Biden proposes raising the corporate tax rate by 7 percentage points to 28%. If former Vice President Biden is elected and his corporate tax plan is enacted, the S&P 500’s current earnings estimates could see a roughly negative 10.6% impact. Exhibit 1: S&P 500 Y/Y CapEx vs. Effective Tax Rate Note: Based on current constituents and weights The Tax Cuts and Jobs Act of 2017 (TCJA) cut the U.S. corporate tax rate from 35% to 21%. One of the goals of this tax cut was

The S&P 500 Index closed at a record high on Friday. Yet second-quarter earnings, which kick off in earnest this week, are expected to shrink from last year – the first such decline for three years. Twelve months ago, prognosticators thought S&P 500 profit for the most recent quarter would rise more than 10%, according to data from Refinitiv. The same people see earnings growth back in double digits in 2020, but they could be wrong again. The four 2019 earnings seasons were always going to face what are known in the jargon as tough comps. That’s because 2018 was

Where should multinational tech companies pay income tax? Changing international rules devised a century ago will be difficult, but Europe is right that asset-light, data-hungry businesses like Google and Facebook merit fresh thinking. The European Commission will this week propose a tax on digital groups’ revenue of around 3 percent, according to Reuters. The move aims to plug an imbalance that sees international digital companies pay a rate of 10 percent in the EU, according to the Commission, compared with non-digital businesses’ 23 percent. Imposing a flat levy on sales is clumsy, as it penalises less profitable firms and investment. But it

For February 22, 2018, our forensic accounting red flag is from a specialty retailer with off-balance sheet debt and an unusual tax impact. We pulled this highlight from yesterday’s research of 91 10-K filings, from which our Robo-Analyst technology collected 15,216 data points. Our analyst team used this data to make 2,357 forensic accounting adjustments with a dollar value of $1.9 trillion. The adjustments were applied as follows: 1,053 income statement adjustments with a total value of $102 billion 920 balance sheet adjustments with a total value of $1.2 trillion 384 valuation adjustments with a total value of $658 billion

For the first edition of 2018 we will look at how we expect the key themes of last year to play out in 2018. Probably the most critical issue is if and when inflation will emerge and what this means for the stock and bond markets. The second is whether crude oil prices will finally break out of the five-year old range. Finally, will 2018 be a positive year for the dollar? A Watched Pot Never Seems to Boil The tax package enacted in December has arguably made the market see inflation as a serious risk for the first time

Dealmakers are no longer living large. In 2015, there were more than 60 mergers and acquisitions announced globally worth at least $10 billion. Combined, they accounted for over a third of total M&A volume, according to Refinitiv data. By 2017, the trend had reversed. Expect an even shorter list of mega-mergers in 2018, but look for U.S. telecoms titan Verizon’s name to be on it. By the time CVS Health unveiled its $77 billion plan to buy Aetna in December, the number of 11-digit takeovers in 2017 had halved from the record set two years ago. Their total value also

Our US Economic Sentiment Indicator (ESI) climbed from 6.0% to 6.2% in November, a nine-month high. Although gasoline prices rose during the month, consumer confidence remained strong as the labour market continued to improve. Meanwhile, business sentiment was buoyed by progress on tax reform. Since those surveys were conducted, tax reform has been signed into law. Since the reform includes large cuts to corporate and personal income tax, business and consumer confidence are likely to remain elevated in the coming months. Accordingly, we expect our ESI for December (scheduled for publication next week) to remain high. Looking ahead, we expect

The Senate managed to pass a tax plan on Friday night and the reconciliation needed with the House version passed earlier in November will likely be finished in the next few weeks so a final version should be ready for Trump’s signature well before year end. This is an extremely complex piece of legislation so even after reconciliation it will be months if not years before its implications – and unintended consequences – are fully evident. But most main themes of the package should remain so we think it worthwhile to consider what the likely impact of the legislations bodes

Our US Economic Sentiment Indicator (US ESI) slipped from 6.0% to 5.8% in October, but official real GDP growth is unlikely to be this strong in Q4. Refresh the chart in your browser | Edit chart in Datastream The rate of economic growth implied by our US ESI, which distils information from numerous consumer and business surveys, has exceeded real GDP growth in each of the last four quarters. This is likely to continue for a fifth quarter in 2017 Q4, with real GDP growth likely to be closer to 4.0% (annualised). The prospect of large corporate tax cuts, as well as

The so-called ‘Trump trade’ may have shown a flicker of life following the passing of a 2018 budget blueprint last Thursday, but we do not expect US tax reform to be enacted until Q1 or Q2 next year. Refresh the chart in your browser | Edit chart in Datastream Want more charts and analysis? Access a pre-built library of charts built by FathomConsulting via Datastream Chartbook in Thomson Reuters Eikon. Last Thursday, Republican senators passed a 2018 budget blueprint by a narrow 51 – 49 margin, with Democrats unanimously opposed. Thursday’s vote is one significant hurdle cleared for the administration’s recent tax proposal; the US dollar, Treasury

The less confident consumers feel, the more they pin their hopes on insurance and warranties. From such unhappy logic, TPG has plucked a financially fairly uplifting deal. The buyout firm has sold its car insurance business Warranty to U.S. insurer Assurant for $2.5 billion, roughly doubling its money over three and a half years. By paying mostly in shares, the buyer also gets some insurance of sorts. Assurant wants to tilt its portfolio further towards “lifestyle” offerings. In plain speak, that means it wants to get more of its earnings from insuring personal effects like phones and cars, rather than

Ford’s new chief executive is betting his ambitious retool on big cost cuts. Jim Hackett, who jumped into the driver’s seat in May, wants to slash $14 billion of fat by 2022 and switch $7 billion of investment to trucks and SUVs from cars. That should boost earnings, helping speed development of electric and autonomous vehicles. The plan will have to fire on all cylinders, though, to catch up with competitors. The huge changes in costs and capital allocation is a stunning indictment of not just predecessor Mark Fields’ three years running America’s second-largest automaker but Alan Mulally’s reign, too.