Profits: Us vs Them

(1) Profits growth during recoveries and expansions. (2) TCJA bumps earnings growth above 7% long-term trend line. (3) Analysts are predicting much higher earnings from tax cut than we are. (4) Stocks are more fairly valued if the analysts are right about earnings. (5) Analysts’ estimated tax-cut impact on corporate profits implies big hit to corporate taxes collected by US Treasury. (6) The Bond Vigilantes Model has been too bearish on bonds since the start of the current expansion. (7) Central banks’ QE programs and weak economic growth have kept yields down. (8) Fed rate hikes and normalization of ECB and BOJ monetary policies, along with faster US growth, could push US yields higher.