The Great Transition highlighted many of the pressures facing the modern day firm or corporation. These include the challenge of competition, greater information and the application of productivity enhancing technology.

SUMMARY:

The Great Transition highlighted many of the pressures facing the modern day firm or corporation. These include the challenge of competition, greater information and the application of productivity enhancing technology. The conclusion drawn from that analysis was that the profitability outlook for firms has and will continue to be diminished.

But corporate profitability, as it applies to equity owners, is more than just gross profits and profit margins. Instead, the return on equity (ROE) offers a more comprehensive assessment of current and future conditions for owners of corporate American equity. This analysis highlights some surprisingly positive findings about future corporate ROEs and less intuitive corporate responses to monetary policy.  

Indeed, the key conclusion from our analysis is that monetary policy is not the driving force of the corporate economy that we might have assumed it to be. Most firms seem to behave as though there are substantially greater drivers of investment than monetary conditions. These conclusions support a continuation of current corporate trends; solid profitability but weak investment.