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.
- Our quantitative work on technology remains poor, and only a single tech subgroup—Technology Distributors—makes our current Attractive list. Per the Group Selection disciplines, there are currently no technology stocks in our Select Industries portfolio.
- Tech’s underperformance has helped restore better relative value to the sector, but valuations aren’t yet cheap enough for a big “reversion-to-the mean” bet.