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.
If a manager has the freedom to buy bonds, there does not seem to be much reason to buy interest sensitive equities as a strategy unless there are other positive factors. Tables in this section demonstrate why. However, if you can’t buy bonds the next best thing is buying high yield top quality utilities with minimal nuclear exposure, as close to a bond proxy as you can get.