Everything points to a fall in the return on equity for shareholders in the future – Natixis

In contemporary capitalism, the return on equity for shareholders is high. But, in the future, an equilibrium with a lower return on capital will probably inevitably emerge. In this new equilibrium, the share of wages and taxes in GDP will increase, and the share of capital income will decrease, according to economists at Natixis.

Return on capital and the share of capital income in GDP to decline 

“We believe that the upward trend in return on equity for shareholders (rising share of capital income in GDP) will reverse due to the upward pressure on wages, especially low wages (e.g., the decision to increase the minimum wage by 25% in Germany) and the need to finance a legitimate increase in many types of public spending through increased corporate taxation.”

“If there is a shift from an upward trend to a downward trend in the share of capital income in GDP, we should also expect a much less favourable trend for stock market indices.”