“Unrealized” Capital Gains Tax is Economic Suicide - The Compound and Friends Recap
Podcast: The Compound and Friends
Published: 2026-02-18
Duration: 1 hr 10 min
Summary
In this episode, Josh Brown and Ben Carlson discuss the implications of unrealized capital gains tax and the current strong earnings growth in the market, emphasizing the resilience of corporations despite economic challenges.
What Happened
The episode kicks off with Josh Brown welcoming Ben Carlson as a guest host while Michael Batnik is on vacation. They reflect on their podcast's legacy and dive into the current earnings season, highlighting impressive growth figures despite market turmoil. Josh notes that earnings surprises have been broad and strong, pointing out that profit margins have continued to rise even in the face of various economic challenges, including inflation and geopolitical tensions.
Josh shares data from FactSet showing that 74% of S&P 500 companies have reported earnings, revealing a blended earnings growth of 13.2% year-over-year for Q4 2025. Ben emphasizes the significance of this growth, especially since it surpasses Wall Street's expectations. They discuss how revenue growth is also strong, with companies not relying on stock buybacks to inflate their figures, which underscores the health of corporate earnings amid an evolving economic landscape.
Key Insights
- Earnings growth is strong and exceeds expectations despite market challenges.
- Corporations have proven resilient, managing to increase profit margins through various economic obstacles.
- Revenue growth is a reliable indicator of corporate health, not influenced by accounting maneuvers.
- The current earnings season reflects a robust economic environment, with companies adapting effectively to recent disruptions.
Key Questions Answered
What are the implications of unrealized capital gains tax?
The discussion on unrealized capital gains tax raises concerns about its potential negative impact on economic growth. Josh Brown and Ben Carlson suggest that imposing such a tax could deter investment and result in a decrease in capital formation, which is vital for a healthy economy. They argue that it may lead to less liquidity in the market, ultimately harming the very individuals the tax is intended to benefit.
How are profit margins performing in the current market?
In their conversation, Josh highlights that profit margins continue to rise despite the economic challenges companies have faced over the last few years. They have navigated supply chain issues, inflation, and other disruptions while maintaining strong profitability. This resilience indicates that corporations have adapted well and are effectively managing costs while still generating significant revenue.
What does the current earnings season reveal about the market?
The current earnings season has revealed a remarkable trend of growth, with 74% of S&P 500 companies reporting earnings that show a blended growth of 13.2% year-over-year. Josh emphasizes that this growth is indicative of a healthy economic backdrop where companies are not just surviving but thriving, which is a positive sign for investors looking for stability in uncertain times.
How does revenue growth compare to previous years?
Ben points out that the revenue growth observed in the current quarter, at 9% year-over-year, is significant as it marks the highest blended revenue growth since Q3 2022. This growth is particularly noteworthy because it is not just a result of inflation, indicating that companies are genuinely expanding their sales and reaching new customers, which is a vital metric of corporate health.
What are the future earnings projections for S&P 500 companies?
Looking ahead, the projections for earnings growth in the upcoming quarters are quite optimistic. The street expects 11.1% earnings growth for the current quarter and even higher projections of around 15% for the following quarters. This sustained growth suggests that companies are well-positioned to continue thriving, which bodes well for the overall market outlook.