Nat Kellogg, CFA
President
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.
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.
04.13.2026
On April 2, 2025, President Donald Trump announced a sweeping set of tariffs on imports into the United States. Dubbed…
04.07.2026
On March 30, 2026, the Department of Labor (DOL) issued its proposed regulation: Fiduciary Duties in Selecting Designated Investment Alternatives….
04.06.2026
The Basel capital framework was created to ensure that banks maintain sufficient capital to absorb losses and reduce the risk…
04.02.2026
Please join Marquette’s research team for our 1Q 2026 Market Insights Webinar analyzing the first quarter across the economy and various…
03.30.2026
In the period between 2009 and 2022, private equity managers thrived amid an environment of low interest rates and rising…
03.23.2026
Global energy costs have risen sharply this month due to a convergence of geopolitical shocks, as critical infrastructure and transport…
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.
If you have questions or need further information, please contact us directly and we will respond to your inquiry within 24 hours.
Contact Us >