Some good news this week on the economic front.
The Business Roundtable CEO Outlook index ticked higher in the third quarter. This index of C-suite executive future expectations just hit its highest level since 2014. Meanwhile, plans to hire people are at a six year high. “This is what CEOs do when their profits are rising,” says Hedgeye CEO Keith McCullough in the video clip above from The Macro Show.
After four straight quarters of profit growth acceleration, corporate America is feeling flush enough to ramp up hiring. And following this economic flow-through a step further, profit growth typically leads wage inflation by two to three quarters. This is good news for everyday Americans and the broader economy.
That said, heading into the third quarter of 2017, the corporate profits outlook isn’t as exciting as it once was.
“You really don’t have easy compares after this quarter,” McCullough says. “So we may be out of runway here, but maybe not.” We’ll see.
The outlook for the U.S. dollar could play an important role in earnings for the coming quarter. As McCullough points out, a down dollar helps earnings because 40% of S&P 500 company profits come from abroad. A weaker dollar allows these foreign-earned profits to come home at a more beneficial exchange rate.
To be sure, corporate profits will be a key metric to watch in the coming quarter. Watch the clip above for more insight.