Bloomberg Intelligence's 'Equity Market Minute' 2/20/2019

Gina Martin Adams from Bloomberg Intelligence discusses the declining expectations for profit growth, attributing it to margin declines driven by excessive company spending. She highlights that gross and net profit margins remain stable, but operating margins are deteriorating. The analysis shows that most sectors in the S&P 500 have stable margin forecasts, with some isolated pricing power issues in consumer staples, materials, and industrials. To stabilize margins and earnings, companies need to rationalize spending.

What is suggested as a necessary action for companies to improve profit growth?

• Hire more employees

• Expand into new markets

• Announce cuts to spending

• Increase marketing efforts

Which sectors are mentioned as having isolated pricing power issues?

• Financials and real estate

• Consumer staples, materials, and industrials

• Technology and healthcare

• Energy and utilities

What is the condition of gross margins for most S&P 500 sectors?

• Below average

• Highly volatile

• Declining rapidly

• Relatively stable and intact

What is the main cause of the decline in operating margin forecasts?

• Rapid company spending relative to revenue growth

• Higher taxation

• Increased competition

• Decreased consumer demand

What is needed to stabilize the margin and earnings outlook according to the final section?

• Reduction in workforce

• Expansion into international markets

• Corporate spending rationalization

• Increased investment in technology