GOLDMAN: America’s biggest companies are obsessed with these 3 themes right now

People demonstrate outside a Verizon wireless store during a strike in New York, U.S., April 18, 2016.
Shannon Stapleton/Reuters

Roughly 93% of all the companies in the S&P 500 had reported their first-quarter earnings by Friday.

After combing through earnings calls, three big themes stood out to David Kostin, Goldman Sachs’ chief US equity strategist: economic growth, regulation, and wage growth.

The first two of these themes largely tie to the economic agenda of President Donald Trump’s administration.

But mentions of one theme suddenly dimmed on the radar compared to the peak of election season in the fourth quarter: Trump himself.

Goldman published its quarterly S&P 500 Beige Book on Thursday, borrowing the concept from the Federal Reserve’s similar release of anecdotes on the economy.

Here’s a sampling of quotes on these three themes:

Economic growth

Most companies acknowledged that confidence in the economy has spiked since the election, but that hasn’t translated to stronger consumer spending, or demand for their products.

“The first thing I’d say is that through March 31, as we look at our results, it’s hard for us to see anything that’s suggestive of a material uptick in consumer confidence or consumer or commercial spending,” said Jeffrey Campbell, the chief financial officer of American Express.

“While we have been gaining momentum, as we look at the many different areas gaining momentum, we can see a change that we have made in how we’re running the business and what value propositions we’re offering, et cetera, that seems to be what is driving the change, as opposed to us getting the benefit of just a generally stronger economic environment.”



Business confidence rose partly on the back of expectations that the Trump administration would roll back expensive regulations.

“Animal spirits were obviously awaken[ed] by the policy direction of the new administration, policy direction that I personally endorse when it comes to regulation of business; less regulation,” said Evan Greenberg, the CEO of Chubb. “God, get government out of our way.”

However, the exact timing of deregulation is uncertain.

“We would have expected sometime over the last couple weeks to have gotten clarity,” Visa CEO Alfred Kelly said during an earnings call. “There was supposed to be clarity no later than the end of March on the next chapter of regulation or guidance in terms of how things would have to go forward. And there hasn’t been, and we’ve been told that it will be delayed likely into early May.”

Labor inflation

Reuters/Frank Polich

With the unemployment rate at a pre-recession low, the labor market appears to be near full employment. That’s causing wage pressure at the company level, and on minimum wages in several states including California and Washington.

Higher wages could hurt margins and stock prices, but are great news for workers.

“Once you start making money, you’ll give more to labor than you did when you were making less money, and they’ll take some of the upside that should go to shareholders,” said William Douglas Parker, the CEO of American Airlines.

“This is getting to a level of compensation across the industry that needed to occur. And once you get to that level, I think you’ll see, as you do in other mature businesses, that labor costs, certainly one, you get efficiencies over time, as good businesses do … but all of us had to get to a point where we got to what, really, team members in this business deserve.”



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