Vastavam web: Judging by conference calls from the latest earnings season, U.S. companies and analysts have dropped their preoccupation with Washington and shifted their focus to automation aimed at defending record profit margins.Mentions of Trump on earnings calls have declined for the year, from a high of 126 calls between April and May, while discussions of automation have increased.
The focus on automation reflects growing concern among executives and analysts about rising labour costs, fund managers said, with jobless claims this month hitting their lowest level since March 1973.But the Trump Administration has yet to pass healthcare, infrastructure or corporate tax cut bills that analysts had predicted would be in place by the end of this year.
“You’ve got a situation where companies are more confident in investing in technology rather than human capital because they know it will come with a fixed cost and may do the job just as well, if not better,” said Steve Chiavarone, a portfolio manager at Federated Investors in New York.The profit margin of the benchmark S&P 500 hit a record of nearly 11 percent in the second quarter, the highest since at least 1993, according to Yardeni Research.
Companies across industries have highlighted investments in automation this quarter that aim to defend or improve their margins.Clearwater Paper Corp (CLW.N) said that an automation project at its Elwood, Illinois facility was saving the company approximately $18 million a year. And SunTrust Banks Inc (STI.N) said that it was testing automation in more aspects of its business.
Barry James, co-portfolio manager of the $3.1 billion James Golden Rainbow fund (GLRBX.O), said his expectations for meaningful U.S. legislation passing this year or next has narrowed with Trump and some members of his own Republican Party increasingly at odds.Given the climate in Washington, it makes sense for companies to invest more in areas like automation that will increase productivity without posing much risk, James said.