Last week, the S&P 500 closed at an all-time high. Today, most major indexes tumbled, while the VIX, the stock market’s measure of volatility, is up. The lukewarm market has some worried the long anticipated correction is finally here.
According to one measure, this fear might be misplaced. Morgan Stanley’s Capex Plans Index, which tracks how much businesses are likely to spend in the coming months, is currently at an all-time high. (Morgan Stanley started tracking future capital expenditures in 2005.) Capex measures the money that businesses invest in tangible assets—like machinery, buildings, and technology. In theory, capital investment makes workers more productive, in turn spurring economic growth.
The Trump Administration has done its fair share to encourage such kind of spending. The GOP tax plan cuts corporate taxes, bolstering corporate earnings, which in turn should boost business investing. A Bank of America Merrill Lynch survey, however, found that most companies planned to spend the $2.5 trillion they’d ushered overseas on paying down debt and buying up shares.
Still, other measures of business spending are rising. Even before the bill passed into law, business investing had grown, with nonresidential fixed investment contributing to 2017 GDP growth.