R&D Market Pulse: Growth Trend Could Be Hit by Tax Changes

The R&D Market Pulse Index for the week ending November 3, 2017 closed at 3,797.68 for the 25 companies in the R&D Index. The Index was up 1.44 percent (or 53.75 basis points) over the week ending October 27, 2017. Sixteen R&D Index companies gained value last week from 0.12 percent (Cisco) to 13.27 percent (Qualcomm). Nine R&D Index companies lost value last week from -0.14% (Pfizer) to -5.15 percent (General Motors).

The Labor Department reported last week that U.S. unemployment dropped to 4.1 percent, its lowest point since December 2000. Analysts noted that this was not all good news, in that the economy now risks overheating with scarce labor, routine record high stock prices and stimulative tax cuts potentially coming with President Trump’s tax bill revisions. Trump nominated Federal Reserve governor Jerome Powell to be the next chairman of the Federal Reserve following the expiration of Janet Yellen’s four-year term in February 2018. While at the Fed, Powell has been a reliable ally of Yellen and would likely continue the Fed’s cautious approach to reversing the Fed’s stimulus policies and push for additional rate increases in 2018 and beyond.

Congressional House Republicans revealed their tax plans last week, which include dropping the corporate tax rate from 35 percent to 20 percent. The proposal ran into immediate resistance from organizations whose deductions would be reduced or eliminated. The bill would also eliminate the electric vehicle tax credit, reducing the incentives for battery-powered automobiles just as manufacturers are ramping up production on them. Republicans are pushing for immediate consideration of the plan with the House Ways and Means committee starting considerations this Monday.

R&D Index member Toyota released information on how it plans to integrate artificial intelligence software into its future vehicles. Toyota’s AI project Yui: is projected to be an onboard virtual assistant that gauges the driver’s mood and offers to drive verbally if it senses the driver is sleepy or distracted. The company plans to start testing Yui:-equipped vehicles on Japanese roads by 2020.

In its continuing legal battle with communications-chip supplier and R&D Index member Qualcomm (over royalty fees), R&D Index member Apple noted last week that it plans to reduce or stop using those chips in products it plans to introduce next year. Replacement chips would be sourced from R&D Index member Intel by Apple.

R&D Index Week Ending November 3, 2017

		Ticker	Exchange	2017 R&D billions$	10/27/17	11/03/17	11/3/17 to 10/27/17	11/3/17 to 1/1/17
1	Amazon	AMZN	NASDAQ	17,774	1,100.95	1,111.60	0.97%	48.24%
2	Alphabet/Google	GOOGL	NASDAQ	15,845	1,033.67	1,049.99	1.58%	32.50%
3	Microsoft	MSFT	NASDAQ	13,987	83.81	84.14	0.39%	35.40%
4	Intel	INTC	NASDAQ	13,499	44.40	46.34	4.37%	27.76%
5	Apple	AAPL	NASDAQ	11,506	163.05	172.50	5.80%	48.94%
6	Volkswagen AG	VLKAY	OTC	11,260	35.90	38.40	6.96%	33.89%
7	Roche Pharm	RHHBY	OTC	10,174	28.62	29.10	1.68%	2.00%
8	Toyota	TM	NYSE	9,170	124.23	125.62	1.12%	7.18%
9	Johnson & Johnson	JNJ	NYSE	9,060	141.78	140.08	-1.20%	21.59%
10	Novartis	NVS	NYSE	7,870	80.72	83.70	3.69%	14.91%
11	General Motors	GM	NYSE	7,468	44.64	42.34	-5.15%	21.53%
12	Pfizer	PFE	NYSE	7,288	35.60	35.55	-0.14%	9.45%
13	Bristol-Myers Squibb	BMY	NYSE	6,942	59.94	62.22	3.80%	6.47%
14	Cisco	CSCO	NASDAQ	6,827	34.43	34.47	0.12%	14.06%
15	Qualcomm	QCOM	NASDAQ	6,723	54.57	61.81	13.27%	-5.20%
16	Oracle	ORCL	NYSE	6,702	50.88	50.18	-1.38%	30.51%
17	Honda	HMC	NYSE	6,519	30.93	32.87	6.27%	12.61%
18	Astra Zeneca PLC	AZN	NYSE	6,363	33.49	34.48	2.96%	26.21%
19	Merck & Co.	MRK	NYSE	5,759	58.24	56.06	-3.74%	-4.77%
20	Daimler	DDAIY	OTC	5,084	71.11	73.25	3.01%	3.58%
21	Bayer AG	BAYN	XETRA	4,880	111.70	116.00	3.85%	17.02%
22	Sanofi SA	SNY	NYSE	4,755	47.53	45.74	-3.77%	13.11%
23	IBM	IBM	NYSE	4,628	153.68	151.58	-1.37%	-8.68%
24	GlaxoSmithKline	GSK	NYSE	4,508	36.23	36.15	-0.22%	-6.13%
25	Eli Lilly Co	LLY	NYSE	4,489	83.86	83.51	-0.42%	13.54%
	Total			209,080	3,743.93	3,797.68	1.44%	27.34%
			Biopharmaceutical		717.68	722.59	0.68%	11.97%
			Automotive		306.81	312.48	1.85%	11.35%
			ICT		1,618.49	1,651.01	2.01%	26.36%

About the R&D Index

R&D Magazine’s R&D Index is a weekly stock market summary of the top international companies involved in research and development. The top 25 industrial spenders of R&D in 2017 were selected based on the latest listings from Schonfeld & Associates’ June 2017 R&D Ratios & Budgets. These 25 companies include pharmaceutical (11 companies), automotive (5), ICT  (8) and conglomerate (1) organizations who invested a cumulative total of more than $209 billion in R&D in 2017, or approximately 10% of all the R&D spent in the world by government, industries and academia combined, according to R&D Magazine’s 2017 Global R&D Funding Forecast. The stock prices used in the R&D Index are tabulated from NASDAQ, NYSE, XETRA and OTC common stock prices (in U.S. dollars) for the companies selected at the close of stock trading business on the Friday preceding the publication of the R&D Index in R&D Magazine’s R&D Daily eNewsletter.

The companies used in the R&D Index include Amazon, Alphabet/Google, Microsoft, Intel, Apple, Volkswagen AG, Roche Pharma, Toyota, Johnson & Johnson, Novartis, General Motors, Pfizer, Bristol-Myers Squibb, Cisco, Qualcomm, Oracle, Honda Motor Company, Astra Zeneca plc, Merck & Company, Daimler, Bayer AG, Sanofi SA, IBM, GlaxoSmithKline and Eli Lilly Co. Stock prices are based on those stocks traded on the U.S. exchanges. R&D Index trends (in the stock prices) are just one indicator of the amount of capital available to these high-technology companies to invest in R&D and should not be implied to indicate the absolute value of R&D investments made by these organizations. The companies chosen for the R&D Index have very large sophisticated internal and global R&D organizations with each company investing between $4.5 and $17 billion annually on their R&D efforts.