【行业报告】美联储-时代的终结：企业利润增长和股票回报的长期放缓（英）-2023.6_市场营销策划_.docx

FinanceandEconomicsDiscussionSeriesFedera1ReserveBoard,Washington,D.C.ISSN1936-2854(Print)ISSN2767-3898(On1ine)Endofanera:Thecoming1ong-runs1owdownincorporateprofitgrowthandstockreturnsMichae1Smo1yansky2023-041P1easecitethispaperas:Smo1yanskyzMichae1(2023).zzEndofanera:Thecoming1ong-runs1owdownincorporateprofitgrowthandstockreturns,“FinanceandEconomicsDiscussionSeries2023-041.Washington:BoardofGovernorsoftheFedera1ReserveSystem,https:doi.org/10.17016/FEDS.2023.041.NOTE:StaffworkingpapersintheFinanceandEconomicsDiscussionSeries(FEDS)arepre1iminarymateria1scircu1atedtostimu1atediscussionandcritica1comment.Theana1ysisandconc1usionssetfortharethoseoftheauthorsanddonotindicateconcurrencebyothermembersoftheresearchstaffortheBoardofGovernors.Referencesinpub1icationstotheFinanceandEconomicsDiscussionSeries(otherthanacknow1edgement)shou1dbec1earedwiththeauthor(s)toprotectthetentativecharacterofthesepapers.Endofanera:Thecoming1ong-runs1owdownincorporateprofitgrowthandstockreturns*Michae1Smo1yansky+June2023AbstractIshowthatthedec1ineininterestratesandcorporatetaxratesoverthepastthreedecadesaccountsforthemajorityoftheperiod,sexceptiona1stockmarketperformance.1owerinterestexpensesandcorporatetaxratesmechanica11yexp1ainover40percentoftherea1growthincorporateprofitsfrom1989to2019.Inaddition,thedec1ineinrisk-freeratesa1oneaccountsfora11oftheexpansioninprice-to-earningsmu1tip1es.Iargue,however,thattheboosttoprofitsandva1uationsfromeverdec1ininginterestandcorporatetaxratesisun1ike1ytocontinue,indicatingsignificant1y1owerprofitgrowthandstockreturnsinthefuture.Keywords'.1ong-runprediction,stockreturns,equitypremium,corporateprofits,interestrates,corporatetaxes.JE1c1assifications:GIO,G12,G17."IthankAndrewChenzEmi1ioOsambe1a,DinoPa1azzo,FranciscoPa1omino,Michae1Pa1umbo,SteveSharpe,NitishSinha,andGustavoSuarezforveryhe1pfu1commentsandsuggestions.Thispaperextendsandsupersedesanear1ierFEDSNote:Smo1yansky(2023).+BoardofGovernorsoftheFedera1ReserveSystem,20thandCStreetsNW,Washington,DC20551,USA.Theana1ysisandconc1usionssetfortharethoseoftheauthoranddonotindicateconcurrencebyothermembersoftheresearchStaffoftheFedera1ReserveortheBoardofGovernors.Emai1:michae1.smo1vanskvfrb.eov.From1989to2019,theS&P500indexgrewatanimpressiverea1rateof5.5percentperyear,exc1udingdividends.TherateofU.S.rea1GDPgrowthoverthesameperiodwas2.5percent.Whataccountsforthisenormousdiscrepancy?Andisitsustainab1e?Iarguethatitisnot.Toreachthisconc1usion,Iconsider60yearsofdataontheearningsandstockpriceperformanceofS&P500nonfinancia1firms,from1962to2023.1exc1udefinancia1firmsfromtheana1ysisbecauseinterestexpensesareaprimaryinputforthem.Moreover,the1everageoffinancia1firmsfe11dramatica11yinresponsetoregu1atoryreformsfo11owingtheG1oba1Financia1Crisis.Mycentra1findingisthatthe30-yearperiodpriortothepandemicwasexceptiona1.Duringtheseyears,bothinterestratesandcorporatetaxratesdec1inedsubstantia11y.Thishadthemechanica1effectofsignificant1yboostingcorporateprofitgrowth.Specifica11y,Ifindthatthereductionininterestandcorporatetaxrateswasresponsib1eforover40percentofthegrowthinrea1corporateprofitsfrom1989to2019.Moreover,thedec1ineinrisk-freeratesoverthisperiodexp1ainstheentiretyoftheexpansioninprice-to-eamings(PE)mu1tip1es.Together,thesetwofactorsthereforeaccountforthemajorityofthisperiod'sexceptiona1stockmarketperformance.Ifirstconsidercorporateprofits.From1989to2019,rea1corporateprofitsgrewattherobustrateof3.8percentperyear.Thiswasa1mostdoub1ethepaceseenfrom1962to1989.Thedifferenceinprofitgrowthbetweenthesetwoperiodsisentire1yduetothedec1ineininterestandcorporatetaxratesfrom1989to2019.Onewaytoseethisistocomparethegrowthofearningsbeforesubtractinginterestandtaxexpenses(EBIT).Infact,rea1EBITgrowthwass1ight1y1owerfrom1989to2019comparedto1962to1989:2.2percentversus2.4percentperyear.Figure1showstheimportanceofdec1ininginterestandtaxexpensesasakeydriverofcorporateprofitgrowth.Thefigurep1otsaggregateinterestandtaxexpensesasashareofaggregateEBITforS&P500nonfinancia1finns.In1989,thismeasurestoodat54percent,c1osetoitsaverageovertheperiod1962to1989.By2019,themeasurehadha1ved,to27percent.Inotherwords,from1989to2019,anever-dec1iningshareofcorporateearningswaspaidouttodebtho1dersandtaxauthorities.This1eftanever-increasingshareavai1ab1etostockho1ders.Whatdoesthisimp1yforthefuture?AsIshowbe1ow,growthincorporateprofitscanon1ycomefrom:(1)EBITgrowth;(2)adec1ineininterestexpensesre1ativetoEBIT;or(3)adec1ineineffectivecorporatetaxrates.Inotherwords,interestandtaxratesmustcontinuetofa11iftheyaretomechanica11yboostcorporateprofitgrowth,astheydidfrom1989to2019.Figure1:InterestandtaxexpensesasashareofEBIT1962197219821992200220122023Note:Aggregateva1uesforSAPSOOnofiancia1firms,1962to2023.Source:CompustatIargue,however,thatitisveryun1ike1ythatprofitgrowthinthefuturewi11benefitmuchfromdec1ininginterestandcorporatetaxrates.Inthecaseofinterestrates,thesereachedexceptiona11y1ow1eve1sevenpriortothepandemic.InDecember2019,the10-year