{"id":10004,"date":"2021-11-26T15:09:18","date_gmt":"2021-11-26T15:09:18","guid":{"rendered":"https:\/\/zackspcg.com\/blog\/?p=10004"},"modified":"2022-02-26T13:05:37","modified_gmt":"2022-02-26T13:05:37","slug":"whats-ahead-for-the-economy-and-corporate-earnings-in-long-term","status":"publish","type":"post","link":"https:\/\/zacksim.com\/blog\/whats-ahead-for-the-economy-and-corporate-earnings-in-long-term\/","title":{"rendered":"What’s Ahead for the Economy and Corporate Earnings in Long Term"},"content":{"rendered":"\n

Alison T. from Topeka,\nKS asks: <\/em>Hello Mitch, I\u2019m curious if you\u2019d ever make a long-term prediction\nabout where the U.S. economy is headed? I\u2019m talking 10, 20, 30 years out. These\nare some pretty crazy times, and I wonder where you see it all going.<\/p>\n\n\n\n

Mitch\u2019s Response:<\/strong><\/p>\n\n\n\n

Thanks for\nyour question, Alison. I generally do not make forecasts more than one or two\nyears out \u2013 there is too much that can change in terms of interest rates,\ninflation, and corporate earnings to give a good answer about the U.S.\neconomy\u2019s trajectory over that many years. If you do encounter a forecast for\nthat many years in the future, don\u2019t read into it too much \u2013 the forecaster is\njust guessing.<\/p>\n\n\n\n

I do think, however, we can use history to make some high-level,\nnon-numerical projections about the future. And I think I can give you an\nanswer to your question using two charts.<\/p>\n\n\n\n

______________________________________________________________________________________________<\/sup><\/p>\n\n\n\n

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The first one is simply United States GDP \u2013 which is a\nmeasure of the economy\u2019s total output \u2013 looked at in the post-World War II era\n(the modern economy). I adjusted the chart to be a natural log so you can\nbetter see the overall trend of economic growth since the late 1940s. As you\ncan see, the U.S. economy has steadily gotten bigger and bigger over the years,\nwith setbacks along the way but not enough to break the trend. <\/p>\n\n\n\n

U.S. Gross Domestic\nProduct, 1947 \u2013 Present <\/strong><\/p>\n\n\n\n

\"\"
Source: Federal Reserve Bank of St. Louis2<\/sup><\/em><\/strong> <\/figcaption><\/figure>\n\n\n\n

The second chart to show you is U.S. corporate profits after\ntax. Long-time readers of my columns know my conviction of tying corporate\nearnings to stock market returns. Changing expectations around interest rates\nand inflation are important, too, but corporate earnings are the engine for the\neconomy and the markets, in my view. As you can see in the chart below,\ncorporate profits have also tracked steadily higher since the late 1940s. There\nwere plenty of bumps along the way, but the engine of profit has marched higher\nfrom decade to decade. <\/p>\n\n\n\n

U.S. Corporate\nProfits After Tax, 1947 \u2013 Present<\/strong><\/p>\n\n\n\n

\"\"
Source: Federal Reserve Bank of St. Louis3<\/sup><\/em><\/strong> <\/figcaption><\/figure>\n\n\n\n

In your question, you referred to these as \u2018crazy times,\u2019\nwhich is a fair assessment. But remember that history is full of crises, high\ntax rates, inflation, disinflation, rising interest rates, bursting bubbles,\nwars, tight and loose monetary policy, and pretty much everything else you can\nthink of. Through it all, the U.S. economy continued to grow and corporations\ncontinued to generate earnings. <\/p>\n\n\n\n

In my view, history offers a compelling enough reason not to\nbet against the U.S. economy long-term. But we are also firm believers in the U.S.\u2019s\nability to lead in innovation \u2013 in analyzing companies as we do every day here\nat Zacks Investment Management, we constantly see new ideas, new businesses,\nnew products, and often marvel at the economy\u2019s ability to grow, adapt, invent,\nand generate new value and wealth. So, while I can\u2019t say for sure where the\nU.S. economy will be in 10, 20, or even 30 years, I do know that I will not be\nbetting against more growth and progress. <\/p>\n\n\n\n

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If you have $500,000 or more to invest and want to\nunderstand your retirement options, get our guide, Thinking of Retiring\nSoon? Here are 4 Things to Consider First.<\/em>4 <\/sup>Simply click on the\nlink below to get your copy today!<\/p>\n","protected":false},"excerpt":{"rendered":"

While it’s impossible to accurately predict conditions 10 or 20 years out, Mitch looks at history to assess the future<\/p>\n","protected":false},"author":3,"featured_media":7436,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[66,71],"tags":[],"class_list":["post-10004","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-mitchs-mailbox","category-private-client-group"],"acf":[],"_links":{"self":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/10004","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/comments?post=10004"}],"version-history":[{"count":1,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/10004\/revisions"}],"predecessor-version":[{"id":10254,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/10004\/revisions\/10254"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/"}],"wp:attachment":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/media?parent=10004"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/categories?post=10004"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/tags?post=10004"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}