Slower Earnings Growth in 2019?

February 21, 2019 | Nat Kellogg, CFA, Director of Manager Search, Managing Partner

Slower Earnings Growth in 2019 chart displaying effects of 2018's tax cuts -- that is, strong growth in corporate earnings

With the Tax Cut and Jobs Act (“TCJA”) now a little over a year old, this week’s chart looks at the effect of the tax cut on companies in the S&P 500. Despite a headline corporate tax rate of 35%, S&P companies in aggregate were paying an effective tax of only 25% over the twelve months leading up to the tax cut. Lowering the headline rate from 35% to 21% has clearly had an effect, as the tax rate for the S&P at the end of the third quarter was down to just 18.4% (a reduction of almost 27% year-over-year). This was one of the main drivers of strong growth in profits for U.S. companies, as the S&P 500 earnings growth peaked at 27% year-over-year in the third quarter (blue dotted line in the second chart). However, as we move into 2019 the positive effects on earnings growth from the tax cuts will fade, and corporate earnings growth in 2019 is likely to be significantly slower than what investors experienced in 2018, which could be a headwind for the equity market as the year progresses.

Print PDF> Slower Earnings Growth in 2019?

The opinions expressed herein are those of Marquette Associates, Inc. (“Marquette”), and are subject to change without notice. This material is not financial advice or an offer to purchase or sell any product. Marquette reserves the right to modify its current investment strategies and techniques based on changing market dynamics or client needs.


Nat Kellogg, CFA
Director of Manager Search, Managing Partner

Get to Know Nat

Related Content

ESG Assets Continue Their Dramatic Rise: Increased demand has led to a surge in U.S.-based ESG assets in recent years


ESG Assets Continue Their Dramatic Rise

The demand for — and supply of — ESG investment opportunities has surged over the past several years. This week’s chart depicts…


Brexit – Deal or Delay?

With merely 21 days left before Britain is due to leave the European Union, global investors are keenly watching their…

Will Assets Flow to Water Infrastructure Opportunities chart displaying projected growth in water and wastewater investment gap


Will Assets Flow to Water Infrastructure Opportunities?

U.S. water infrastructure provides and treats around 355 million gallons of water per day to support cooking, bathing, and productivity…


Can a Government Shutdown Slow the IPO Market?

Companies have been staying private longer, but expectations for Initial Public Offerings (IPOs) in 2019 are high. Uber and Lyft…

Can the PG&E Bankruptcy Create Profits for Hedge Funds chart


Can the PG&E Bankruptcy Create Profits for Hedge Funds?

This week’s chart of the week examines the price performance of Pacific Gas and Electric (“PG&E”) Corporation’s public debt and…

Equities Close to a Key Resistance Level chart


Equities Close to a Key Resistance Level

This week’s chart looks at price action of the Value Line Geometric Index. Originally launched in 1961, the Value Line…

More articles

Subscribe to Research Email Alerts

Research Email Alert Subscription

Research alerts keep you updated on our latest research publications. Simply enter your contact information, choose the research alerts you would like to receive and click Subscribe. Alerts will be sent as research is published.

We respect your privacy. We will never share or sell your information.

Thank You

We appreciate your interest in Marquette Associates.

If you have questions or need further information, please contact us directly and we will respond to your inquiry within 24 hours.

Contact Us >