Positive Catalyst for Research and Development

Last Edited by: LPL Research

Last Updated: April 03, 2024

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Jeffrey Roach:

Hi, I am Jeffrey Roach, Chief Economist for LPL Financial, with a quick update on what's happening in the global markets and the call to action for investors. First, the new tax bill could be a positive catalyst for research and development spending. The house passed a bill to bring back bonus depreciation and other deductions for research and development. It's currently in the Senate, and if this gets enacted, we could see another spike in business spending on intellectual property, just like we did during the pandemic. You could see that spike in the graph. Accelerated depreciation tax credits would likely be that positive catalyst for business spending on R&D. Second, service spending is back to pre-pandemic trend. After several years of consumers splurging on travel, recreation, other services, real services spending is back to trend. This is important because it suggests that this splurge is over and your average consumer will likely revert to lower spending on services, which is by far the biggest part of consumer spending.

Jeffrey Roach:

Third, personal income declined in February. Real disposable personal income declined from the previous month, the first outright decline, month-on-month since September, and putting some pressure on future spending. The key takeaways from the Fed's favorite report is the trajectory for consumer spending is softening, especially since real disposable incomes declined in February, and also core services Inflation is slowing and will likely continue throughout the year. So by the time the Fed meets in June, the data should be convincing enough for them to commence its rate normalization process. Now where we sit today, markets need to have the same patience the Fed is exhibiting when it comes to inflation data. Well, that's all for now, and if you want more insights on global market trends, follow us on social media and take care.

 

Jeffrey Roach, LPL Financial's Chief Economist, explains the research and development tax bill, service spending trends, and personal income declines.

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