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A Bird's Eye View Blog

Fireside Charts: $1 Trillion Returned to U.S. After Tax Cuts, Buybacks Set Record, and USD Breaks Through Support

By:BCM Investment Team | Date:Jan08, 2020 | Category: Equity, Economics, Market Highlights, Fireside Charts

U.S. companies have repatriated more than $1 trillion from foreign subsidiaries to their U.S. parents since 2017—more specifically, since the passing of the Tax Cuts and Jobs Act (TCJA). Unemployment has since seen record lows and consumer spending remains strong, despite ongoing weakness in manufacturing and trade. But companies quickly set another record with the additional funds. Do we owe them a "thank you" for reinvesting in American innovation and hiring, or did shareholders and company executives, and the companies themselves, reap most of the benefits? Either way, we may need to prepare for the dollar's buying power to decrease after it recently broke through its multi-year downside support levels. Could that make it difficult for consumers to sustain current spending levels, kneecapping U.S. GDP, or will it benefit multinational corporations, further boosting share prices—especially for the top five stocks making up 18% of the S&P 500? We'll be keeping our eyes on the trend to find out.

 

1. Cause...

 

dividend transfers to U.S.

Source: WSJ Daily Shot, from 1/7/20

 

 

2. ...and effect...

 

S&P 500 share buybacks

Source: WSJ Daily Shot, from 1/7/20

 

 

3. There appears to be some momentum behind a weaker U.S. Dollar. Will this continue?

 

USD/CAD

Source: WSJ Daily Shot, from 1/7/20

 

 

4. How long can the U.S. consumer keep spending?

 

consumer spending U.S. gdp

Source: WSJ Daily Shot, from 12/30/19

 

 

5. ...Because U.S. manufacturing will need time to recover from the trade wars...

 

richmond fed manufacturing index

 

Kansas city fed manufacturing index

Source: WSJ Daily Shot, from 12/30/19

 

 

6. Not exactly a shock:

 

S&P 500 market cap

Source: WSJ Daily Shot, from 12/30/19

 

 

 

 

 

 

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Disclosure: The charts and info-graphics contained in this blog are typically based on data obtained from 3rd parties and are believed to be accurate. The commentary included is the opinion of the author and subject to change at any time. Any reference to specific securities or investments are for illustrative purposes only and are not intended as investment advice nor are a recommendation to take any action. Individual securities mentioned may be held in client accounts.