Our “Early Cyclicals” composite continues to perform so well—and at such a late stage in the market cycle—that we should probably consider changing its name. This group, which consists of retail, housing, and auto-related industries, is up 29% in the last eight months after stalling out for the first three quarters of 2014. Its “Late Cyclical” counterpart is up just +5% over the same time frame.
The S&P 500 record median profit margin of 10.3% is now almost a full percentage point above the last cycle’s peak of 9.4% (second quarter of 2007). Trends across S&P sectors are not as uniform as one might expect, though, with only half of the ten sectors last quarter at profitability levels that exceeded their 2001-2007 expansion highs.