Slower Earnings Growth in 2019?

February 21, 2019 | Nat Kellogg, CFA, President

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
President

Get to Know Nat

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.

Related Content

Column chart showing total deal size for 14 non-financial corporate bond deals of $20B or more since the start of 2025. Out of 14, only three were unrelated to AI or hyperscalers. For full dataset, please contact marquettemarketing@marquetteassociates.com.

08.17.2026

Supersize Me!

As a college football player struggling to put on mass, the “supersizing” deal at McDonald’s was hard to beat. For…

08.10.2026

The Yen is Wayward… but Investors Carry On

After reaching nearly ¥164 per dollar, its weakest level in roughly four decades, the yen had become a source of…

Combined column and line chart showing expected hikes/cuts and policy rate as of 12/31/2025 through 7/31/2025 as well as the actual policy rate for upcoming Fed meetings, 12/31/2025 through 12/9/2026. As market expectations have changed in 2026, investors' original outlook for two rate cuts were priced out in March and eventually switched to two rate hikes. For full dataset, please contact marquettemarketing@marquetteassociates.com.

08.03.2026

Hit the One in the Middle, Mr. Chairman!

In the cinematic masterpiece Rocky IV, Rocky gets dazed by his opponent, Captain Ivan Drago, and complains that he sees…

Column chart showing redemption volume for business development companies (PDCs) in billions of dollars by quarter, 1Q 2022 to 2Q 2026. Filled redemptions are shown in solid orange, but 1Q and 2Q 2026 also include stacked lighter orange for Unmet Redemptions data (-$6.5B and -$9.7B, respectively). Up to the second half of 2025, volume hovered at less than -$2B, but has since increased. For full dataset, please contact marquettemarketing@marquetteassociates.com.

07.27.2026

Liquidity Isn’t Free

The rapid growth of non-traded business development companies (BDCs), which are investment vehicles that pool investor capital to make loans…

07.24.2026

2026 Halftime Market Insights

This video is a recording of a live webinar held July 23 by Marquette’s research team analyzing the first half…

07.22.2026

Under the Radar for the Second Half

The usual midyear version of these letters has touched on year-to-date performance as well as the most influential macroeconomic and…

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 >