FAST FIVE: Profit "Inequality": Is It Possible That S&P 500 Companies Make Money And No One Else Does?
Appropriate or not there is something unusual at work with the profit data, as it appears the only firms making any money nowadays are those in the S&P 500.
That represented an increase of approximately $220 billion from the level of after-tax operating profits recorded in 2015.
The key takeaway here is that over the past 4 years S&P 500 companies after-tax profits increased 50%, while the earnings of everyone else recorded a decline of roughly 30%. How can that possibly be an accurate picture of the earnings of all the companies operating in the US.
S&P 500 companies report their earnings on a financial accounting basis.
For investors, the argument being used by equity analysts and strategists that the equity market is not expensive is based on “reported” and not “actual” profits.