US: S&P 500 ROE rebounding but policy help required to climb much higher – Goldman Sachs

Analysts at Goldman Sachs explain that late-cycle margin risks and the uncertain path of oil suggest that significant further growth in S&P 500 ROE will depend on policy reform.

Key Quotes

“Investors have begun to appreciate that the boost to S&P 500 earnings from corporate tax reform will likely be delayed until at least 2018. Regulatory reform that does not require legislation faces fewer obstacles. Reduced leverage has weighed on Banks ROE but deregulation could lead to $200 bn of excess capital deployment and a 350 bp boost to 2018 ROE. While Financials ROE declined in 4Q to 9.3%, the lowest level since 4Q 2012, aggregate S&P 500 ROE rose slightly to 14.4% due to the rebound in Energy margins.”