US corporate revenue growth is on the road to zero

Wall Street has launched 2025 with forecasts of sunlight and rainbow. The S&P 500 revenue growth was expected to be stronger in 2025 than in 2024. This was Banner Year. However, during 2025, analysts’ forecasts dimed. Wall Street’s consensus forecast for S&P 500-year revenue growth for 2025 fell to 17% in January, 13% in February and 12% in March, and is currently registered at 8% per year at the end of April (see chart). Obviously, analysts look at Storm Clouds on the horizon. But in our view, the initial forecast of 17% on Wall Street is by no means plausible, and not even 8% today. In fact, revenue growth rate for 2025 was 0%.

Why did you think Wall Street’s 17% revenue growth forecast was an empty pie? For one thing, it was built on false assumptions of strong economic growth. When it comes to determining national income, we will focus on the amount of money theory. This states that when money supply contracts, actual economic activity and inflation will also be contracted. Since the establishment of the Federal Reserve, there have only been four episodes of money supply contraction in 1920–22, 1929–33, 1937–38, and 1948–49. Everything followed a recession, and in some cases the Great Repression.

The same goes for today’s case. The cyclical deceleration we are witnessing today has been led by the deceleration over the past three years in the growth of money supply measured at M2. The M2 has not grown since April 2022. This shows that the US economic slowdown began to move before Trump took office.

Tariffs and uncertainty

So, at the start of 2025, just looking at the money supply process over the last few years, we already knew that the US slowdown was baked into the cake. But since the beginning of this year, the market has been shaking by Trump’s tariff policies. Trade and tariff policies are anti-growth policies in their own right. After all, they are taxes on international transactions. But even more, Trump has narrowed down many others by threatening that government agencies and agencies will eliminate or eliminate wholesale. In addition to these actions, many other actions included in the avalanche of the President’s executive orders, have created uncertainty for the administration.

With his book Depression, war, cold war (2006), Robert Higgs It is defined Uncertainty in the regime (also known as policy uncertainty) as “an investor property rights in government capital and the revenue it brings could be further weakened by government actions.” It’s a subset of business confidence. The uncertainty of a high level of administration is associated with a low level of business trust, and a sufficient level of business trust is required for private stakeholders to invest. In other words, administration uncertainty calms private investment. Robert Pindyck from MIT Put it down Thus: “Investment expenditures at total levels can be very sensitive to risks in various forms… (including) uncertainty about future tax and regulatory policies.” The intellectual antecedent for Higgs’ book was nothing but Joseph Schumpeter, who expressed a similar idea in his groundbreaking book. Capitalism, Socialism, Democracy (1942). Of course, there is always a pocket of uncertainty scattered throughout the economy, as is characteristic of the capitalist system. On the other hand, administration uncertainty is a systematic infusion of uncertainty across the economy. So it’s a rare event.

After all, the element of administration’s uncertainty is already cultivating an ugly head. Signs are everywhere. Baker, Bloom & Davis Uncertainty Index It is currently at the highest level in its 40-year history, and on Tuesday, the US Consumer Trust Index for April was It’s fallen It reaches the lowest level since October 2011. Business leaders are unable to make long-term investment decisions, and trading activities are no longer possible. Dry It encourages many businesses Abandon Complete revenue growth guidance. New York Fed survey in April Capital expenditure plans, which plunge to levels seen only twice in the last 20 years among business leaders in the Tristate region, were shown during the big money crisis and community lockdown. The level of uncertainty is very high, so companies are Stop Investing in product marketing and advertising campaigns.

Investment Freeze

The best history paralleling the current situation in the United States is in the case of Great Fear Pression. In fact, President Franklin Delano Roosevelt’s second New Deal (1935-1940) also created uncertainty in the administration. This created what the Higgs called the “big period” from 1933 to 1940. This was the 12 years since the start of depression in 1929, when the US economy continued to fall significantly below capacity. Net private investment between 1930 and 1940 was negative thanks to the uncertainty of the administration. why? Because the second new deal has led to a fundamental restructuring of the American economy. This restructuring left business leaders and investors uncertain about what the rules of the game are. Trump’s radical policies and proposals have the same effect.

Therefore, we expect actual GDP growth to zero under the stagnation of 1-2 money supply and the uncertainty of the administration created by Trump’s policies. So we expect revenue growth to be zero. As economic growth slowed to the expected extent for the past 30 years, the S&P 500 revenue growth has also been constantly falling to zero.

With revenue seasons in full swing, we hope that more companies will elicit guidance as uncertainty increases and trade disruptions increase. Even if Trump’s tariff regime is finalized, what could be, whether under this president or a future administration, remains unclear in its durability. Without long-term policy clarity, companies cannot reasonably justify long-term investments. As a result, it will soon become clear that the current consensus expectations of Wall Street’s current annual revenue growth rate are merely empty pie.

Steve H. Hanke is a professor of applied economics at Johns Hopkins University, and the author is Leland Jager.Capital, interest and waiting. Guy Petcho is an advisor to two Sigma discretionary macro investment teams.

read more:

• It is impossible to end the US trade deficit with tariffs, and it is risky Eliminate two long-standing US surplus
• Trump’s tariffs are not “common sense” –And they risk America’s credibility and “exorbitant privileges”
• Trump’s customs program is based on Flawed assumptions regarding trade deficits
• Tariffs won’t make America great again: Former Chairman and President of Export Bank

This story was originally introduced Fortune.com