“The stock market selloff last week was fueled in part by worries that big companies are going to have a hard time keeping their profits growing as the Federal Reserve starts shutting down its massive money pumps.
That’s news to a panel of top business economists, who insist profit growth will remain on track, according to a survey released Monday by the National Association for Business Economics.
“The outlook for 2014 is strengthening,” NABE President Jack Kleinhenz, said in a statement accompanying the release. Profit gains are expected “regardless of any changes in monetary policy.”
Last week’s stock market rout was sparked by signs that the worlds developing economies may be slowing. But investors are also jittery about the Federal Reserve’s recently-announced plans to taper off its five-year-old, $3 trillion economic stimulus program.
(Read more: What’s up with the drop in stock prices?)
The worry is that the end of the so-called Era of Cheap Money could crimp the steady, ongoing rise in corporate profits that has propelled stocks higher since the end of the Great Recession. Higher borrowing costs could prompt companies to cut back on investment in expanded operations, including hiring and new plant and equipment.
But the business economists—many of whom work for the country’s biggest companies—doubt that will happen. Their advice: Don’t fear the taper.
The Fed’s new policy will have “no material effect” on either profits or capital spending plans, according to some 70 percent of the 64 respondents. And 13 percent said they thought the Fed’s new policy would have a positive impact.
The results weren’t uniform across industries, though. Economists at finance, insurance and real estate companies—about a third of those surveyed—showed the most concern about the Fed’s new moves. Some 40 percent said they expect a profit hit this year from the Fed’s change in policy….”