The volatility of profit margins

Robert Gay | Fenwick Advisers| 14 January 2019

Figure 1 shows net profit margins for S&P 500 companies over the past five decades. I have used this in various presentations. The key message is that the cyclical volatility in earnings has increased dramatically since the 1980s. Recessions now bring very large swings in profit margins, even mild ones such as the one in 2001, despite the secular decline in inflation and its volatility.

S&P 500 Net Profit Margin
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