The Trump administration said tax cuts would push businesses into an all-out spending spree, turbo-charging wages and investments in growth. Instead, corporate buybacks hit a new record, Axios' Courtenay Brown reports.

What's happening: Thanks to the Q4 GDP report, we know how much businesses used their tax windfalls to invest in buildings, machinery or intellectual property since the lower corporate tax rate took effect.

• Business investment petered out as 2018 progressed and ended the year more with a whimper than a bang, the report showed. (The Fed even said as much back in November.)

Why it matters: Going forward, that leaves the U.S. economy largely dependent on the labor force for an economic boost, which may also be tapped out soon.

• U.S. productivity, typically jump-started by strong business spending, also may be a non-factor in the growth picture if business investment peaked in the middle of last year.
• More fiscal stimulus from the government also is unlikely.

What they're saying:

• "[Business investment] was okay, but certainly not the promised boom. Should be well into double digits," Dean Baker, an economist at the Center for Economic and Policy Research, a left-leaning think tank, tweeted.
• "It was a confident year for business expansion, though not quite as strong at the end as the start," tweeted Patrick Chovanec, chief strategist at Silvercrest Asset Management.

What to watch: "We would not be surprised to observe downward revisions in the estimate to business investment given the outright weakness in industrial production and durable goods data through the end of 2018," Joe Brusuelas, chief economist at RSM, a consulting firm, wrote in a note to clients.

Capital spending contributed the second most to GDP in the fourth quarter of 2018, but nowhere near as much as it added to economic growth in 2011, its peak since before the financial crisis, Courtenay writes.

What's going on: "Labor has become the new capital in this [economic] cycle," Megan Greene, chief economist at Manulife Asset Management, tells Axios. "Companies can buy a fancy new machine or, because labor is cheap, they can just hire more people."

Also of note: Once a big boost to economic growth, housing has become a drag since the financial crisis, as the New York Times' Ben Casselman points out. Housing contributed -0.01 percentage points to last year's 2.9% GDP growth.

The initial fourth quarter U.S. GDP reading beat expectations, rising 2.6%, which puts the annualized figure at 2.9% (or 3.1% depending on whom you ask).

DRW Trading strategist Lou Brien breaks the report down for Axios.

By the numbers:

• Personal consumption was +2.8%, missing expectations. Goods consumption was +3.9% and services consumption was +2.4%.
• Gross private investment was +4.6%.
• Net exports were -$963.2 billion, the largest deficit on record, but little changed from the previous quarter which was the previous record deficit.

The big story may have been intellectual property, which saw a 13.1% increase on the quarter, registering the second highest reading since 1999, and contributing 0.56% of the report's total.

• The Q4 GDP Deflator was +1.8% and the PCE core inflation measure was +1.7% on the quarter, both a tenth higher than forecast.

The big picture: "Overall, it was just OK; unremarkable except for a few data points," Brien said.

• "Seventy-four percent of the GDP increase was personal consumption. The inventory buildup was large, but it was large in the previous quarter as well, so this sector added just 0.13% to the total."

Relity check: "Net exports were a record deficit, -$963.2 billion, but it was not too much worse than the previous quarter (the previous record deficit), so there was only a slight drag on the report, just -0.22%, whereas the previous quarter was about -2%."

On the other hand: "The inventories were quite high. But then, after two large accumulations in consecutive quarters, maybe this is ready for a down quarter and that could hit the upcoming GDP reports; we'll have to see."

The bottom line: "Annualized rate for 2018 was 2.9%, matching the best year during the Obama Administration."

Tesla's convertible bond payment is due today, and the bonds won't convert to equity. Shareholders won't be crying.

By the numbers:

• Tesla's $920 million in convertible senior notes expire at a conversion price of $359.87 per share.
• Tesla shares are well below the conversion price, so the company will have to pay that debt in cash.

It may be a good thing that Telsa won't have to give its underpriced stock to bondholders, Axios' Felix Salmon writes.

• The company had $3.7 billion in cash on its books at the end of last year, WSJ notes, including existing deposits. Tesla also had more than $5 billion in accounts payable and accrued liabilities along with nearly $10 billion in long-term debt, not including today's convertible bond payment.

Between the lines: When Tesla's 2019 bond was trading over par in late 2014, the stock wasn't anywhere near the $360 conversion price.

Why it matters: If Tesla was going to issue dilutive new equity, it would want to do so in a way that actually brings in cash for the company.

Investors look to have rekindled their love affair with emerging markets in the first 2 months of the year.

What's happening: The dovish shift from the Fed and global central banks, and de-escalating China-U.S. trade tensions are bringing investors back to the asset class after a rough 2018 performance.

• "These events look likely to restart a Wall of Money to EM and our high frequency flow trackers are picking up a sharp spike," Jonathan Fortun, an economist, and Tariq Khan, a researcher, at the Institute of International Finance, said of the organization's recent findings.

Details: EM securities attracted $26.3 billion of foreign capital in February.

After 5 consecutive months of outflows, IIF analysts estimate that net capital flows, including banking and foreign direct investment, to emerging markets was $20.9 billion in January.

• In particular, large flows into South Africa ($16.4 billion) and India ($13.3 billion) were behind the surge in overall inflows.

MSCI said Thursday it would quadruple the percentage of access foreign investors can get to stocks from mainland China in its widely tracked emerging-markets index, which is tracked by nearly $2 trillion of funds.

Analysts say the decision could push from $80 billion to $125 billion into China's equity markets.

"We like what we see in China, the evolution and all that.

"I actually think if there is a trade war with the U.S., China would double down on the capital account in a positive way. I spent a lot of time with senior leadership of the Chinese government and it's going to take decades to balance the trade relationship with the U.S.

"One way to cure that is to do it through the capital accounts, to say, 'Look, we're going to let a lot more American money or Western money come flood the capital markets in China.'

"We're lucky that China is going slow in opening up because it would create enormous disruption.

"Think about this, would you invest in German 10-year bonds at 15 basis points rather than Chinese 10-year bonds at 3%? Germany's pretty good but China’s reserves are a lot bigger and they will deliver on their obligation to pay.

"So there would be a lot of selling of German bonds and a lot of buying of Chinese bonds if it were a completely fungible market.

"The smart people in emerging markets are saying, 'Wow, a whale is about to jump into the pool here.'"

P.S. ... Fernandez tells Axios a WSJ article alleging MSCI added China A shares to its index "after it came under heavy pressure from the Chinese government, which tried to curtail the company’s business in the country" is totally false.

Fernandez says MSCI is staunchly independent and its process is very long and transparent. "So, to think we do all of that and then in a dark room we’re going to be subjected to influence that goes this way or that way is just dumb. It’s just naïve."