Bob Doll’s bullet points

From Bob Doll’s weekly commentary for Nuveen Investments:

  • Third-quarter earnings started strong. Should this persist, it may mark the end of the earnings recession.
  • It looks likely that Hillary Clinton will win the presidency while the House remains in GOP hands.
  • Equity markets face near-term pressures, but the economic and earnings environment should provide tailwinds….

Bob is right that earnings excluding the Energy sector are improving. The graph below compares As Reported earnings per share (EPS) for the S&P 500 to those excluding the Energy sector.

S&P 500 Index

But while EPS may be increasing, profit margins are shrinking. Which makes me wonder how long EPS will continue to rise.

Profit margins (after tax) per unit of gross value added

Source: Weekly Investment Commentary from Bob Doll | Nuveen

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