Updated Aug 31, 2023 - Economy

Corporate profits are way down, yet investors remain untroubled

Data: FactSet, U.S. Bureau of Economic Analysis; Chart: Axios Visuals
Data: FactSet, U.S. Bureau of Economic Analysis; Chart: Axios Visuals

U.S. corporate profits fell for the second straight quarter in Q2, per the latest government numbers.

The intrigue: Investors remain untroubled by the slowdown.

Driving the news: Profits for all U.S. corporations — not just the large, publicly traded firms on the stock market — were down 6.5% from Q2 of 2022, the Commerce Department reported.

  • A 25% profit downturn at financial firms hammered by interest rate increases over the last year helped drive the downturn.
  • Other companies did a bit better, with profits down just 4.5% compared to a year earlier.

Yes, but: The middle of last year was the most profitable period on record for corporate America, with pre-tax profits topping an annual rate of $3 trillion in the second and third quarters.

  • It would have been hard for that to last.

Be smart: The stock market is forward-looking as investors look at profits expected 12 months out.

The bottom line: If the profit decline is behind us, and the recent drop in interest rates helping to supercharge tech shares is for real, it could be an autumn to remember for the market.

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