Pre-GFC Margins May Return with Cost Surge
April 22, 2022
The S&P 500 Index operating profit margin has expanded by more than 400 basis points relative to the period preceding the Global Financial Crisis.
Throughout the preceding cycle, margins have been supported by the combination of low inflation and low cost of capital. As inflation increases, this will be reflected in the cost of raw materials and labor/services, at the same time that cost of capital is increasing (i.e. higher interest rates), putting pressure on profit margins.
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