While earnings get all the headlines, at Sendero we are paying attention to corporate profit margins. Profit margin gauges the degree to which a company or a business activity makes money, essentially by dividing income by revenues. Expressed as a percentage, profit margin indicates how many cents of profit has been generated for each dollar of sale.
The S&P 500 trailing profit margin hit a record 12% in November 2021. With inflationary pressures rising everywhere, corporate earnings may top in 2022. A peak in profit margin has historically coincided with a slowdown in economic activity.