Name: Lower Corporate Taxes And Your Investments: The Experts Weigh In
Uploaded: 2016-11-30
Duration: 4 min 52 s
Description: Fortune’s 2017 investor panelists give their takes.

[ SOUND ] [ BLANK_AUDIO ] Anne, do you think that the anticipation of less regulation, possibly, and maybe a lower tax rate under a united GOP government, does that seem to be something that pries the IPO window open a little more? I'm not that. That would probably be a better question for my other panelist here. Anyone else want to jump in? Krishna? Well, I think the change with respect to tech companies is slightly more subtle. That is, they were supposed to grow pretty rapidly. They probably grow slightly faster as a result of the policies that you're talking about However earlier the markets were assigning very significant premium valuations to those tech companies because nothing else was going to grow in th rest of the world. That has shifted. I think the lustre of tech to some extent as being the sole grown arena Has kind of come off a little bit, so those valuations have come down. And I think that's a pretty meaningful change in terms of the outlook for the tech as an investment, as opposed to the underlying Compliance [ INAUDIBLE ] That's right. Go ahead. To comment specifically on your question about taxes, we calculate that a one percentage point decline in the corporate tax rate can drive a $ 50 of S & P earnings. And so if we are talking about a rate coming from 26 % down to 20, which is a suggestion that has been made by someone in the GOP, that could drive 10 percentage points plus in terms of earnings growth next year. And that's the income tax rate on specific And that's the corporate tax. The corporate tax. Right. Got it. Yeah. Yes, which would drive more-- Not even counting the 1. 4 trillion dollars that's parked overseas, or maybe it's 2. 4 in corporate cash. Absolutely. That brought back repatriated used to repay debt, for capital expenditures, or return to shareholders in the form of dividends could be very stimulative for, For the economy as well. And the interesting thing is that part of that reduction in the corporate tax rate is to be financed by getting away from interest rate deduction at the corporate level. Which means that companies that are highly leveraged might not benefit as much as companies that have low levels of that. Mm- hm, that makes a lot of sense. And you were gonna bring something in before, and I- Yeah, I think I was gonna comment about the premium given to the growers and the fast growers. Clearly we should see growth rates improve in other industries. And we'll see some of that growth rate improve because they are becoming more like tech companies. Look at General Electric as a good example. They effectively are a software company at this point in time. And they started that process five years ago in Silicon Valley. But I do think we'll still see very fast growth in what I'll call the arms merchants to the digitization of the global economy, and those are the core tech companies themselves. Yes- And could you tell me, sorry to interrupt, Sebastian. And could you tell me a little bit more that when you talk about the core tech companies, for our readers whose understanding, and our viewers whose understanding isn't as nuanced, what are those companies that you're thinking of, those [ INAUDIBLE ] arms merchants? Sure. MacKenzie Issued a report the other day which Fortune reported on that's saying only about 18 % of global enterprises are far into digital transformation. So it means we've got most of the planet still trying to digitize everything. So who are the beneficiaries here? I call them the arms merchants. Certainly they're Amazon Microsoft, Google, to some extent IBM as well who offers a cloud platform, and those companies have more growth ahead of them in what has been enormous growth for Amazon, Google and even Microsoft this year. Around them are another set of companies, young companies like Atlassian. Atlassian is a company that develops tools to actually write the code. And every company, Goldman Sachs, has 20, 000 developers. And those developers need to write code 30 % faster to keep up with There are peers that are digitizing in a financial services area. So when I talk about the core infrastructure of Selfware, who are the tool vendors that deliver the pieces to these large global enterprises, the love empty become, fully digitally transformed. [ SOUND ] [ BLANK_AUDIO ] [ SOUND ]

Fortune’s 2017 investor panelists give their takes.