By MarketWatch Premium: Stock market gains depend on profit margins rising, and they’re already impossibly high
The stock market would plunge if company profit margins were to decline even part of the way back to their long-term average.
This is hardly a new insight. I’d be a rich man if I had a dollar for every time over the past 20 years that someone predicted profit margins would revert to their mean. And, at least so far, they’ve continued going up, with margins for S&P 500 SPX companies reaching a new all-time high in 2021.
But…
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