Goldman Sachs: U.S. Companies Will Reduce Cash Spending By a Record 33%

Michael LaVere
  • A new report by Goldman Sachs projects US companies slashing cash spending by a record 33 percent. 
  • Goldman analysts expect a steep decline in buybacks and dividends in 2020. 

Goldman Sachs says U.S. companies will reduce cash spending by an annual record of 33%. 

According to a report by Business Insider, Goldman Sachs published a note on Friday predicting a drastic cutback in cash spending by US companies through the remainder of the year. 

The note reads, 

We forecast S&P 500 cash spending will decline by an annual record 33% during 2020 as firms prioritize liquidity in a worsening economic environment.

Early reporting from companies indicates profits have fallen almost 15% on average in response to the ongoing coronavirus pandemic. Business Insider notes if the trend continues through the end of the quarter it would represent the largest year-over-year profit decline since Q3 2009. 

Goldman analysts led by David Kostin expect buybacks and dividends to also experience a harsh decline in 2020. 

The note continues, 

Buybacks and dividends will also decline sharply in 2020, falling by 50% and 23%, respectively.

Despite the market impact, Goldman does not expect all firms to slash dividends this year. The report cites Johnson & Johnson and Proctor & Gamble’s decision last week to raise their dividends to 6.3 percent and 6.0 percent, respectively.

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