Chart is for illustrative purposes only. Past performance is not necessarily an indication of future results.
For investors, corporate margins allow companies to retain more profit from each dollar of revenue and are an important part of the earnings equation. The current bull run in corporate profit margins began during Covid and has been driven in part by advances in technology and artificial intelligence. Despite this year’s higher inflation and interest rates, there have been further gains.
While margins have been rising in both the U.S. and Europe, the U.S. retains a clear advantage. As shown in the chart, consensus 12-month forward operating margin estimates for the S&P 500 now exceed those for the STOXX Europe 600 by 4.3 percentage points. Stronger margins have supported resilient earnings and helped underpin U.S. equity leadership.
Can the momentum continue? We expect margins to remain strong, although the pace of improvement could moderate over the next six to 12 months. Even so, we believe that backdrop may continue to support earnings growth and reinforce our continued preference for U.S. large cap equities within a diversified portfolio.
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The S&P 500 Index: The S&P 500 Index is a stock‐market index that tracks the performance of 500 of the largest publicly traded U.S. companies, weighted by their market capitalization, and is widely used as a benchmark for the overall U.S. equity market. STOXX Europe 600: A stock market index representing 600 large-, mid-, and small-cap companies across 17 European countries. Earnings Before Interest and Taxes (EBIT): Earnings before interest and taxes, a measure of a company’s operating profit before financing costs and income taxes.
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