Decades of deflationary forces that helped feed booming prices for U.S. stocks are over, at least for now.
During a recent interview, Kimball Brooker, a portfolio manager at First Eagle Investments in New York, said this success came “to a degree, at the expense of labor.” With large increases in wages at a time of high inflation for supply costs, the ability to raise prices is critically important for companies to maintain profit margins.
Brooker said corporate gross margins can “give us a clue about the flexibility of a business. The gross margin mainly reflects the direct costs. The higher the margin, the more flexibility a business has to compete and remain reasonably profitable in an absolute sense.”
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