The Fed with a stock market forecast, yes really. OK, its a research paper just published on Thursday titled:
The summary is (bolding mine):
I show that the decline in interest rates and corporate tax rates over the past three decades accounts for the majority of the period’s exceptional stock market performance. Lower interest expenses and corporate tax rates mechanically explain over 40 percent of the real growth in corporate profits from 1989 to 2019. In addition, the decline in risk-free rates alone accounts for all of the expansion in price-to-earnings multiples. I argue, however, that the boost to profits and valuations from ever declining interest and corporate tax rates is unlikely to continue, indicating significantly lower profit growth and stock returns in the future.
Aside from the academic language there is this more emotive snippet (bolding mine):
- If real earnings growth is not likely to
exceed 2 percent per year over the long run, then the outlook for stocks is bleak.
More (32 pages!) at that link above.
Fed Chair Powell