The bear case is that profit margins for the S&P 500 – now pushing almost 10% – cannot possibly be sustained, let alone expand from here. And thus, the logic goes, falling profit margins cannot possibly be good for stocks.
Unless they’re falling because companies are paying workers more and economic activity picks up to the point where reinvestment is necessary. In this context (of increased household income, spending and confidence), falling margins may not be the end of the world.
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