- There has been a great deal of discussion regarding profit margins for the S&P 500 reaching record levels recently.
- Since 2010 the information technology sector has seen its margin improve about 10 percentage points to 25.5% from 15.3% as these companies likely have benefited from increased scale and likely some pricing power.
- We believe that one of the underappreciated aspects of the margin improvement we’ve seen over the past 10+ years has been the long-term decline in interest rates.
- While overall interest costs have increased 1.5% since 2010, overall debt levels are up almost 40%, showing how lower rates have helped keep a lid on interest costs.
For further details see:
Will Higher Rates Hurt Margins?