The R&D Market Pulse Index for the week ending December 1, 2017 closed at 3,822.10 for the 25 companies included. The Index was down -1.46% (or -56.44 basis points) from the week ending November 24, 2017. Fourteen R&D Index companies gained value last week from 0.42% (Volkswagen) to 3.04% (Cisco). Eleven R&D Index companies lost value last week from -0.17% (Intel) to -4.96% (Qualcomm).
The U.S. Senate passed their version of revisions to the U.S. tax code late Friday night, which now must be correlated with the U.S. House’s bill with a final bill being sent to the White House for approval. There are numerous differences between the two bills, but none big enough according to analysts that cannot be compromised and solved and still send Trump a bill before the end of the year. The big change that both bills include (and won’t be changed) is the lowering of the corporate tax rate from 35 percent to 20 percent to make U.S. businesses more competitive in the global marketplace. The U.S. currently has the third highest corporate tax rate among 173 countries – only the United Arab Emirates (top rate of 55 percent) and Chad (40 percent) have higher corporate tax rates. The 39 percent U.S. tax rate is the federal 35 percent rate plus an average state tax rate of 4 percent.
The Senate’s offset to the tax cuts include a revised tax on corporations’ stockpiled foreign profits of 14 percent for cash and 7 percent for liquid assets, up from 10 percent and 5 percent in previous versions.
Either tax revision is likely to add about $1.5 trillion to the national debt (from reduced tax revenues) over the next ten years. Advocates of the tax reduction bills state that the reduced tax revenues will be made up for with increased corporate growth and thus increased taxes. Several organizations have stated that these measures are not likely to match the lost revenues from a reduced corporate tax rate. The Senate tax bill was stated as being implemented in 2019, while the House bill had its reductions starting in 2018. These details also need to be established. Interviews with corporate administrators state that reduced taxes will have a small effect on corporate R&D investments, along with increased stock repurchases and equipment/infrastructure upgrades.
The Federal Reserve, with its likely Chair-designate Jerome Powell, has stated that it will keep close tabs on the economy and quickly implement additional interest rate increases if it sees the economy beginning to overheat due to the reduced tax rates. The Fed still is expected to add its third 2017 short-term interest rate at its December 12-13 meeting to a range of 1.25 percent to 1.50 percent –the last rate hike for outgoing chair Janet Yellen. Fed notes indicate that three interest rates are also expected to be implemented by the Fed in 2018, with two rate increases scheduled for 2019. The 2018 ending interest rate would then be 1.75% to 2.00 percent and the 2019 ending rate would be 2.25 percent to 2.50 percent.
|R&D Index Week Ending December 1, 2017|
|Ticker||Exchange||2017 R&D billions$||11/24/17||12/01/17||12/1/17 to 11/24/17||12/1/17 to 1/1/17|
|Johnson & Johnson||JNJ||NYSE||9,060||138.01||139.98||1.43%||21.50%|
|Astra Zeneca PLC||AZN||NYSE||6,363||33.84||32.85||-2.93%||20.24%|
|Merck & Co.||MRK||NYSE||5,759||54.35||55.87||2.80%||-5.10%|
|Eli Lilly Co||LLY||NYSE||4,489||84.03||85.32||1.54%||16.00%|
About the R&D Index
R&D Market Pulse 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.