Corporate profit margins are near historic highs, and analysts project they could go higher.
Most agree that these fat margins have come at the cost of the American worker. The unemployment rate is high and wages are low as companies squeeze their employees.
Here’s a chart from Credit Suisse’s Andrew Garthwaite that shows the inverse correlation between margins and wages.
Credit SuisseLast week, Garthwaite cranked up his year-end target on the S&P 500 to 1,640 from 1,550. Among other things, he noted that he expects corporate profit margins to stay high.
“According to his research, margins don’t turn until months after wages bottom,” he said.
Here’s his evidence:
“We note that all the signs are that wage growth is still muted and we doubt that it accelerates until unemployment falls to c6.5%,” he wrote.
NOW WATCH: Money & Markets videos
Business Insider Emails & Alerts
Site highlights each day to your inbox.