• Gold Money
    05/26/2016 - 14:27
    Here’s a question that might have you pondering: Is gold a commodity? More importantly, are we doing a disservice to the gold industry by calling gold a commodity? These may sound like silly...

"Equities Peak 12-18 Months After A Peak In Margins; We Are Now 15 Months After The Peak In Margins"

Tyler Durden's picture


Two months ago, we looked at historical examples of what happens with the US economy any time corporate profit margins suffer a drop as large as the one experienced over the past 12 months when margins have plunged by (at least) 60 bps. The outcome: a recession on 5 out of 6 prior occasions.


And while the economy is already feeling the recessionary impact of sliding margins as predicted in early October, with the manufacturing ISM printing at its lowest level since the recession, an even more important question is what happens to the stock market now that margins have peaked. On this topic, most have been mum with the usual "answer" being that margins will keep rising. Alas, as even Goldman recently showed they won't.

So assuming margins have peaked in this cycle, what does that mean for stocks? For the very simple answer we go to Credit Suisse according to which "equities peak 12-18 months after a peak in margins." 

Where are we now? "we are now 15 months after the peak in margins."

So, give or take three more months?

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Wed, 12/02/2015 - 21:30 | 6868605 Dr. Engali
Dr. Engali's picture

We do know that we are talking about a policy tool right?

Wed, 12/02/2015 - 20:51 | 6868649 Slimjimmy
Slimjimmy's picture

S&P peaked in May FYI.

Wed, 12/02/2015 - 20:52 | 6868653 tarsubil
tarsubil's picture

Doesn't the last second of approach to the black hole last forever?

Wed, 12/02/2015 - 21:23 | 6868761 FreeShitter
FreeShitter's picture

Gold and Silver getting wacked again http://www.investing.com/commodities/real-time-futures

Wed, 12/02/2015 - 21:35 | 6868796 ebworthen
ebworthen's picture

QE4 and NIRP might hold that off for a bit; unless of course their plan is to raise rates, rake the little people's chips off the green felt (again), and then do QE4 and NIRP. 

It''ll be like 2001 & 2008 - deja vu all over again!

Wed, 12/02/2015 - 22:37 | 6868981 rsnoble
rsnoble's picture

Well then, now that you've figured it out, we need to increase margins!

Wed, 12/02/2015 - 23:33 | 6869169 MajorFall
MajorFall's picture

I thought equities were a 6 month forward looking discounting mechanism?

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