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3 Things Investors Need To Know About The $4 Trillion Infrastructure Plan: Part 2

1 14 21
13.08.2021

Here in part 2, we'll examine what this potentially stronger economic growth means for corporate earnings and the stock market.

In the long run...each 1% move in U.S. GDP growth should translate into roughly 3% to 4% growth in the earnings of S&P 500 companies." - Bank of America

According to Bank of America's economists (also part of the blue-chip consensus), 1% faster GDP growth translates into about 3.5% faster corporate earnings growth over time.

Today the bottom-up consensus long-term EPS growth forecast from FactSet is 8.5% CAGR. Historically, analysts tend to overestimate by 2% to 3%, and adjusting for the historical probability of recession (14%) that would be 6.4%.

(Source: FAST Graphs, FactSet Research)

Including the pandemic and post-pandemic recovery, earnings have grown at 8.5% CAGR for the last four years, and that's what analysts expect to continue.

If the economy were growing 1% faster, as Moody's expects if the $4 trillion infrastructure........

© Entrepreneur


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