U.S. corporate earnings growth is on the road to zero

In 2025, Wall Street began expectations of sunlight and rainbows. S& P 500 profits are expected to grow stronger in 2025 than 2024, which was a remarkable year. However, throughout 2025, analysts’ expectations were dark. Wall Street consensus for S&P 500 in 2025 decreased by 17 % in January, decreased to 13 % by February, 12 % in March, and currently, at the end of April, it was 8 % in the year (see planning). It is clear that analysts see the clouds of the storm on the horizon. But from our point of view, Wall Street’s expectations of 17 % are not now reasonable, nor today 8 %. In fact, we expect the profit growth 2025 by 0 %.

Why did we think that profit growth expectations by 17 % of Wall Street were a pie in the sky? For one reason, it was built on a wrong assumption of strong economic growth. When it comes to national income design, we look forward to the quantity theory of money, which states that when cash contracts shrink, real economic activity and inflation will also shrink. Since the founding of the Federal Reserve, there have been only four episodes of criticism contractions: 1920-22, 1929-1933, 1937-1938, and 1948-1949. All stagnation follows, in one case, the great depression.

Today’s case does not differ. The periodic slowdown that we are currently witnessing in slowdown has slowed over the past three years, in the growth of the M2 monetary. Since April 2022, M2 has not grown. This indicates that the American economic slowdown was placed before Trump took office.

Definitions and uncertainty

Therefore, at the beginning of 2025, only by looking at the march of money presentation over the past few years, we have already known that the slowdown in the United States had baked the cake. Since the beginning of the year, the markets have been threatened with Trump’s tariff policies. Trade and tariff policies themselves are anti-growth policies-after everything, they are a tax on international transactions. But more than that, Trump canceled, or threatened him to eliminate wholesale government offices and agencies, and the pressure of many others. These procedures, in addition to a large number of others in the ice collapse of presidential executive orders, have created uncertainty in the system.

In his book Depression, war and cold war (2006), Robert Higgs Known The uncertainty in the system (also known as the uncertainty in politics) as “the possibility that property rights will be reduced to investors in their capital and income that results in more governmental procedures.” It is a sub -group of business confidence. High levels of uncertainty in the system are linked to low levels of work confidence, and the special parties are ready for investment sufficient level of work confidence. In other words, the uncertainty in the system disturbs private investment. Massachusetts Institute of Technology Robert Benedic Put it Such: “Investment spending at a total level may be very sensitive to the risks in different forms …[including] Uncertainty about future tax and organizational policy. “The intellectual precedent of Higz’s book was only Joseph Shumpeter, who expressed similar ideas in his historical book Capitalism, socialism and democracy (1942). Of course, there are always pockets of uncertainty spread throughout the economy, as it is special for any capitalist system. Understanding in the system, on the other hand, is a systematic injection of uncertainty throughout the economy. As such, it is a rare event.

As it turned out, the elements of uncertainty in the system have already raised its ugly head. Signs everywhere. the Index of uncertainty, Baker, Davis It is currently at its highest level in its 40 -year -old history, and on Tuesday, the US consumer confidence index in April He falls To its lowest level since October 2011. Business leaders are no longer able to make long -term investment decisions, causing deals activity to Dries And pushed many companies to Abandon Totally profit growth instructions. the The Federal Reserve in New York in April Among the entrepreneurs in the Tritat region have shown capital spending plans that drop to levels seen only twice in the past two decades: during the great financial crisis and major panels. The level of uncertainty is so high that companies even to stop Investing in marketing and advertising campaigns for its products.

Freezing investment

The best historical parallel to the current situation of the United States is the state of great depression. In fact, the new deal created the Franklin Dylano Roosevelt II (1935-1940) also the uncertainty in the system. This led to the “Great period” of 1933-1940, when the American economy continued to work significantly than 12 years in a row after the beginning of the depression in 1929. Thanks to the uncertainty in the system, the net private investment between 1930 and 1940 was negative. Why? Because the second new deal entered into a comprehensive reorganization of the American economy. This restructuring business leaders and investors is not sure of the rules of the game. Trump’s policies and Trump’s proposals have the same effect.

Therefore, we expect the real GDP growth to zero under the second infection of stagnation in the width of money and uncertainty in the system that produced Trump’s policies. However, we expect profit growth to zero to decrease. Over the past thirty years, when economic growth has slowed to the point that we expect, the growth of the S& P 500 profits have always decreased to zero.

With the profit season in full swing, we expect that more companies will withdraw instructions due to the increased uncertainty and the interruption of the widespread trade. Even once the Trump tariff system is completed – all – the works will remain not sure of its durability, whether under this president or future management. Without the long -term policy, companies cannot reasonably justify long -term investment. As a result, the current Wall Street expectations will be revealed by 8 % of the annual profits as more than one pie in the sky as well.

Steve E. Hank Professor Applied Economy at Johns Hopkins University and the author, with Liland Yiger, fromCapital, interest and waiting. Guy Petcho Adviser to the total investment team in Sigma.

Read more:

• It is impossible to end the American trade deficit with definitions, and it risks Get rid of two American artists for a long time
• Trump’s tariff is not the “proper sense” –They put the credibility of America and a “heavy concession” at risk
• The identification program depends on Trump on Defective assumptions
• Definitions will not make America great againChairman of the Board and former Chairman of the Export and Import Bank

This story was originally shown on Fortune.com