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Expand chart
Data: Bridgewater Associates; Chart: Axios Visuals

Bridgewater Associates estimates U.S. equities would be 40% lower than where they are today without the consistent expansion of profit margins.

Why it matters: The world's largest hedge fund is warning that corporations' high profit margins are peaking, posing a risk to the stock market's rally.

  • Several factors have contributed to companies' fatter bottom lines over the last 20 years: corporate tax cuts, the rise of globalization, less anti-trust enforcement, low interest rates and workers' shrinking bargaining power for more pay.
  • But "many of these drivers of high profit margins are now under threat," Bridgewater analysts say in a new white paper, and the "long-term valuation of equities hinges heavily on what happens to margins going forward."

Of note: Without the benefit companies got from the tax cut last year, and with higher material and labor costs, analysts expect shrinking profit margins as companies release first quarter earnings.

  • Still, as of yesterday's close, the S&P 500 is just 31 points from the record high set late last year.

Go deeper: The low-wage benefit for U.S. companies is over

Go deeper

U.S. economy adds 245,000 jobs in November as rate of recovery slows

Data: BLS; Chart: Axios Visuals

The U.S. economy added 245,000 jobs in November, while the unemployment rate fell to 6.7% from 6.9%, the government said on Friday.

Why it matters: The labor market continues to recover even as coronavirus cases surge— though it's still millions of jobs short of the pre-pandemic level. The problem is that the rate of recovery is slowing significantly.

1 hour ago - Health

Fauci says he accepted Biden's offer to be chief medical adviser "on the spot"

The government's top infectious-disease expert Anthony Fauci said Friday that he "absolutely" will accept the offer from President-elect Joe Biden to serve as his chief medical adviser, telling NBC's "Today" that he said yes "right on the spot."

Why it matters: President Trump had a contentious relationship with Fauci, who has been forced during the pandemic to correct many of the president's false claims about the coronavirus. Biden, meanwhile, has emphasized the importance of "listening to the scientists" throughout his campaign and transition.

Updated 3 hours ago - Politics & Policy

Highlights from Biden and Harris' first joint interview since the election

Joe Biden. Photo: Mark Makela/Gettu Images

President-elect Joe Biden and Vice President-elect Kamala Harris sat down with CNN on Thursday for their first joint interview since the election.

The big picture: In the hour-long segment, the twosome laid out plans for responding to the pandemic, jump-starting the economy and managing the transition of power, among other priorities.

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