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It’s not that bad,” remarked Jamie Dimon, boss of JP Morgan Chase, of the global economy on July 16th. But, Wall Street’s favourite banker had to concede, business sentiment “is a little bit worse”. Prospects for American companies have indeed dimmed. Analysts expect earnings of the biggest among them, which have just begun reporting their latest set of results, to have declined in the second quarter. This would mark two consecutive quarters of falling profits, the first such “earnings recession” since 2016. Coming just as the current economic expansion makes history as America’s longest ever, it raises the prospect of a long boom running out of steam. Bosses are getting twitchy.
America Inc has enjoyed an extraordinarily good run since the country rebounded from the global financial crisis of 2008-09. The economy has grown, inflation has been low and interest rates rock-bottom. Despite unemployment hovering below 5% wage pressures have been modest. All told, annualised corporate profits exceeded $2trn last quarter, nearly double the level a decade ago. President Donald Trump’s tax reform cut the corporate tax rate from 35% to 21%. This and his deregulatory efforts have freed up capital. Companies have used the windfall to buy back shares—reducing the amount of stock and superficially boosting earnings per share. The s&p 500, Dow Jones Industrial Average and Nasdaq Composite, three leading share indices, hit record highs on July 15th.