1. First quarter GDP slightly declined by 0.3%; strong core GDP at 3%. 2. Private business investment surged nearly 10%; machinery increased by 22.5%. 3. Tax cuts expected to boost investment and corporate growth significantly. 4. Inflation indicators signal potential Federal Reserve rate cuts coming. 5. GDP growth may actually reach 3.2% when adjustments are considered.
Increased business investment and anticipated tax cuts may lead to higher future earnings, reminiscent of the post-2017 tax cut environment that boosted stocks significantly.
The optimistic projection of economic growth combined with substantial business investment signals potential upward pressure on S&P 500 earnings and valuations.
Tax policies typically have longer-term effects on business investment and overall economic growth, similar to the sustained market rallies following tax reforms.