President Trump’s policies and cutback on regulation is having an incredible impact on businesses. For the first time since 2011, America’s largest companies are showing two consecutive quarters of double-digit profit growth, according to a report in the Wall Street Journal.
And after seeing a 15% increase in the first quarter, data from Thomson Reuters shows that earnings at S&P 500 companies are expected to rise 11% in the second quarter. In fact, nearly 60% of the firms in the index have reported second-quarter results so far.
Corporate America is steaming ahead in earnings despite the fact that several policy initiatives created in an effort to help boost companies’ bottom line, such as corporate-tax cuts and increased government spending on infrastructure, have been put on the back-burner while everyone dealt with the drama of the GOP’s recently-failed efforts to repeal and replace Obamacare.
In fact, with the S&P 500 up 16% since early November and 10% this year, stocks have been soaring since the President was elected.
Industries from finance to automotive to tech are all enjoying the second-quarter profit gains, while earnings are expected to decline only in the utilities sector, according to data from Thomson Reuters.
Analysts and economists credit a weaker dollar, which has made it easier to sell American-manufactured goods overseas and has kept lending fees down. They also point to improved wages, which lead to more consumer spending without raising labor costs for employers, leading to greater profits. Prior cost-cutting efforts and restructuring in various industries has also contributed to the bottom line.
Sales rose in the quarter by an expected 5%, which is the second-biggest increase in more than five years, according to Thomson Reuters.
On Friday, the Commerce Department reported that the gross domestic product rose at a 2.6% rate in the second quarter, up from 1.2% in the first quarter.
President Trump’s promise to put $1 trillion toward infrastructure is still being planned, but it’s unlikely he’ll get that much money out of Congress. However it was pointed out in an article published in the Washington Post earlier this month that the Energy Department’s loan program for innovative energy can be used to finance energy infrastructure projects today without any additional congressional approval. There’s a reported $41 billion in its coffers.
Last week, congressional Republicans and the Trump administration outlined plans to cut individual and corporate tax rates “as much as possible” with a timeline to advance legislation by the end of September.
Steering away from embarking on a new, consumption-based tax system, lawmakers agreed to find a “viable approach for ensuring a level playing field between American and foreign companies and workers, while protecting American jobs and the U.S. tax base.” To that end, they’ve decided to table the controversial issue of border adjustability and focus on tax reform instead.
“We appreciate that there are many unknowns associated with (border adjustability) and have decided to set this policy aside in order to advance tax reform,” they wrote in a joint statement.
Evan Greenberg, CEO of insurer Chubb Ltd. , told investors last week that the U.S. badly needs a tax-code overhaul and higher government infrastructure spending to remain competitive.
“But an awful lot of this requires legislation, and we need an administration that is focused, that is working with Congress,” he said in a conference call. “And we need a Congress that comes together to address these issues of our country.”