Companies Keep Spending – Capital Project Boosts
In the midst of recession woes, high-interest rates, and economic uncertainty, companies have surprisingly stayed on track to have record growth in the expenditure department. For the third quarter, capital spending is on pace to reach $200 billion for companies within the S&P 500. Although the S&P 500 is down over 16% year over year, there has been nearly a 20% rise in capital spending since the third quarter of last year. During a bear market, this can be something unsuspected, as investors would hope companies would begin cutting costs and becoming resourceful to adapt to the current economic climate. Facebook’s parent company Meta, has recently received a lot of backlash from investors due to high spending in areas that haven’t necessarily gotten their bang for their buck. This, coupled with low earnings, sent Meta stock crashing down to levels they haven’t seen since six years ago.
Another notable company to follow suit in the Standard and Poor’s 500 is Tyson Foods, which has forecasted its capital project spending to grow over 30% in 2023 compared to this year. This even comes after earnings were recently reported lower than expected, helping to send their stock down the 25% they are for the year. As the year enters the holiday season and the start of 2023, capital spending can be assumed to only get larger as companies undertake large projects. Nevertheless, investors should be sure to look at companies’ capital expenditures before they may want to sign on, to see whether their dollars are going into ideas that can benefit them as we are looming over a recession.
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I am not a financial advisor and my comments should never be taken as financial advice. Investments come with risk, so always do your research and analysis beforehand.