Chart 1: US S&P500 is ignoring the fall in profit margins of the listed corporates. Scary !!

The rise & euphoria in S&P 500 trades is scary. The profits margins of listed companies has come down heavily. Perhaps there is room for correction ahead !

Chart 2: US Stocks markets are way out of sync

Corporate earnings work like gravity for stock prices. The correction in the month of March 2020 brought the stock prices to realistic level. However, the rise since then has taken the stock prices to elevated levels again.

Chart 3: US S&P 500 is on unstable footing

Markets are slave of Corporate earnings. The red line in chart above is the profit margins of S&P 500 companies. White line is the S&P500 index. The way S&P 500 has jumped back perhaps shows that studying fundamentals is a futile exercise ! Dangerous !!

Chart 4: India Unemployment vs Composite PMI

Sudden rise in Unemployment in India has something to do with Purchase Managers Index. The sentiment of Purchase Manager will climb quickly to 40 or 45. That would mean that unemployment shall also reduce fast. However, the tail of the problem is expected to remain sticky.

Chart 5: RBI Interest Rate History

Since 2015, RBI has reduced interest rates to half, i.e. from 8% to 4%. However, lower interest rates have not translated into lower interest rates of borrowing. It has not resulted in consumption boom, as was expected.


By Sameer Rastogi

18 years of experience, PG in Finance and has delivered Wealth Management lectures at IIM Lucknow, IBS Gurgaon and IIPM Delhi. Contributed to various newspapers. Strength – Application of Economic fundamentals to Investment

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