Profit Margins & EPS
Profit margins had been elevated until this year but are still above average. The top panel of the chart shows S&P 500 profit margin in orange and EPS in blue. The S&P 500 price chart is in the lower panel. Both use month-end data.
The percentage drop in EPS is highlighted for the early 2000's and Global Financial Crisis periods. The related declines in the S&P 500 are shown as well.
Note the drop in margin to the low single digits for the two periods. EPS and S&P 500 price charts are log scale to help visualize similar percentage moves across the entire period.
Will profit margins and EPS fall in similar magnitude to the previous periods and how does market react? More to marinate on.