Do you want to know what corporate America cares about?
Sure you do. After all, you’re a stockholder and although I sometimes wonder whether this escapes some non-negligible percentage of investors, that means you own part of the company.
It’s probably no surprise that management is concerned about the same thing everyone else is concerned about: the reflation meme and the extent to which it’s viable.
More specifically, management wants to know whether the Trump administration intends to follow through on the growth friendly promises that got the new President elected, or whether the only thing that actually matters to the White House is Steve Bannon’s social agenda.
Well fortunately, Goldman has you covered when it comes to parsing earnings calls for kernels of (possibly) useful information. As the bank notes, “in our quarterly Beige Book publication, we gather anecdotal evidence of fundamental and thematic trends from the earnings transcripts of companies in the S&P 500.”
Below, find the executive summary that outlines this “anecdotal evidence.”
Tax reform: Managements are optimistic about potential corporate tax reform, but are concerned about the controversial border-adjusted tax. Lower corporate taxes represents a potential tailwind to corporate earnings, but our US Economics team expects comprehensive tax reform may be delayed until late 2017 or early 2018. Selected examples: BBT, BXP, CAT, CB, CVX, JNJ, PFE, PNC, UPS, and UTX.
Regulation: Hopes for widespread deregulation and improved regulatory clarity are increasing confidence among some management teams. Selected examples: BBT, BXP, CMCSA, COP, CVX, MA, MO, PAYX, PX, and T.
Fiscal spending: Managers of industrial firms are enthusiastic about potential infrastructure spending and a possible end to the defense sequester. President Trump proposed a $1 trillion infrastructure plan in his presidential campaign, but we expect the actual spending package will be $25 billion per year. Selected examples: AEP, AET, DGX, FDX, JNJ, LMT, LUV, and PX.
Trade policy: Management views are mixed on whether PresidentTrump’s trade proposals will be constructive or will lead to damaging retaliation from US trade partners. Selected examples: CB, HON, MS, NKE, and PYPL.