Largely unnoticed, the US corporate sector has become cashflow poor over the past 18 months
Largely unnoticed, the US corporate sector has become cashflow poor over the past 18 months. Rising capex spending, accelerating buybacks and increasing dividends have not only underpinned rising equity markets, but have also driven deterioration into negative aggregate corporate sector cashflow (see LINK below for chart). That deterioration generally signals the entry into the final stages of the economic cycle (i.e. the final 1/3rd)....Consistent with that, corporate sector profits typically peak on average 12 months prior to the recession (table 1).....while tighter credit conditions and an inverted yield curve also signal that start. At present credit conditions are yet to tighten and the yield curve is yet to invert - those therefore point to at least 12 more months of economic expansion (and this cyclical bull market). Once the Fed's tightening cycle begins, though,...(VIEW LINK)
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