The coming long-run slowdown in corporate profit growth and stock returns [pdf] (2023)

Paper’s main claim and reactions

• Thread centers on the idea that falling interest rates and corporate tax rates explain much of 1989–2019’s exceptional stock returns, and that this tailwind is unlikely to continue.
• Some commenters find the argument compelling and “mechanical”; others see it as overly narrow and dismissive of technology, globalization, and structural changes.

Interest rates, taxes, and stock performance

• Several argue that multi‑decade stock outperformance is strongly correlated with a four‑decade decline in rates; rising rates in 1968–1982 coincided with poor real returns.
• Others stress that high/low levels of rates matter less than their direction of change and that rates cannot keep falling from near‑zero, so the past regime is over.
• There’s pushback that rate declines are not “luck” but partly a response to deflationary innovation.

Technology, innovation, and productivity

• One side: semiconductors, software, AI, etc. obviously create massive value; it’s implausible to downplay them relative to Fed policy.
• Counterpoint: at the macro level, creative destruction shifts profits across firms more than it raises aggregate profit share; tech often becomes table stakes, not a lasting profit driver.
• Debate over the “productivity paradox” and whether current measures understate quality improvements and non‑monetized value.

Index funds, S&P 500, and market structure

• Discussion of S&P 500’s changing composition and inherent upward bias; others note the entire market also churns, so it’s still a decent proxy.
• Disagreement on whether “just buy the index” will keep working: some invoke efficient markets; others think the era of easy index gains driven by falling rates is ending.

Globalization, automation, and aggregate profits

• Some argue the paper underweights gains from global supply chains and future automation/AI.
• Others respond that under standard models, widely diffused technology and globalization don’t sustainably raise aggregate profit margins once competition responds.

Financialization, buybacks, and inequality

• Concerns that “financialization” and buybacks boost short‑term returns and executive pay while hollowing out workforces and US manufacturing.
• Counterpoints note middle‑class 401k holders also benefit, though many lack market exposure and face job insecurity.

Demographics, retirement, and regime risk

• Aging populations and retirement drawdowns are seen as a major headwind for future returns.
• Debate over whether pensions vs. 401k‑style systems better handle demographic shifts; no consensus.

Regulation and public vs. private markets

• Multiple comments describe going public as increasingly burdensome (accounting, disclosure, activism), helping drive firms to stay private and outsource capital‑intensive activities like manufacturing.