Friday, April 19, 2013

Can the stock market go higher?


One of the key ways that equities can move higher is through increases in margins, but the problem is that margins are already high as seen by the charts from Zacks. Our guess is that margins will start to decline in-line with the higher cost of regulation and specialized labor. If that is true, earnings will come down. The momentum in stocks has been a margin story and not a revenue story. You can have a situation of declining margins yet more revenue but that seems less likely with the current macro environment.

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