Net profit margins are pacing for 11.7% growth in the first quarter, above the five-year average of 11.5% growth and higher than the same period a year ago, per FactSet.
Largely, this has been driven by cost-cutting, not rising revenues. In 2023, investors cheered Big Tech’s cost-cutting efforts that led to significant earnings growth. In 2024, companies outside the tech sector have tapped a similar playbook, setting up the rest of the index for earnings growth through the rest of the year.
What? That makes no sense at all.
If profits go up, taxes should go up. Much like with income, where higher income equals higher taxes.
Companies being more efficient is great, as long as the resulting increased profits are reinvested into the economy. Either by expanding/investing, which results in more jobs on other areas, but decreases profit. Or by increasing wages for the remaining workforce, increasing disposable income which then gets reinvested broadly by consumerism.
Or by paying taxes, thus ( in theory) redistributing it to the general populace, as taxes are used for general expenses.
The only thing that should not happen is the increased profits only translating into multi million dollar bonuses for the leadership.