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Goldman with the good news.
Near-term: The worst of the profit margin reset is likely behind us. After surgingto a record high of 12% in 2021, S&P 500 profit margins have plunged by more than 100 bp in recent quarters. But in 1Q 2023, companies reported margins in line with pre-COVID levels and above both consensus estimates and 4Q 2022 results.
Resilient revenues, slowing input cost inflation, and a weakened USD suggest margins should stabilize in coming quarters. Our macro model points to just a 36bp decline in the S&P 500 net margin in 2023 to 11.3%.
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About the author
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific's leading geo-politics and economics portal.
He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.
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