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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

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Jeff Sessions loses Alabama Senate primary runoff

Jeff Sessions. Photo: Michael DeMocker/Getty Images

Former Attorney General Jeff Sessions has lost the Republican nomination for Senate to Tommy Tuberville in Alabama in Tuesday night’s primary runoff, AP reports.

Why it matters: Sessions had been the underdog in the race against former Auburn University head football coach Tommy Tuberville, who had the backing of President Trump. Tuberville will now face off against Sen. Doug Jones (D-Ala.) in November, who is considered to have one of the most vulnerable Democratic Senate seats in the country.

Updated 7 hours ago - Politics & Policy

Coronavirus dashboard

Illustration: Aïda Amer/Axios

  1. Global: Total confirmed cases as of 9 p.m. ET: 13,273,537 — Total deaths: 577,006 — Total recoveries — 7,367,106Map.
  2. U.S.: Total confirmed cases as of 9 p.m. ET: 3,424,304 — Total deaths: 136,432 — Total recoveries: 1,049,098 — Total tested: 41,764,557Map.
  3. Politics: Biden welcomes Trump wearing mask in public but warns "it’s not enough"
  4. Public health: Four former CDC heads say Trump's undermining of agency puts lives at risk — CDC director: U.S. could get coronavirus "under control" in 4–8 weeks if all wear masks.

Bank CEOs brace for worsening economic scenario

JPMorgan CEO Jamie Dimon. Photo: J. Lawler Duggan/For The Washington Post via Getty Images

Wells Fargo swung to its first loss since the financial crisis — while JPMorgan Chase and Citigroup reported significantly lower profits from a year earlier — as the banks set aside billions of dollars more in the second quarter for loans that may go bad.

Why it matters: The cumulative $28 billion in loan loss provisions that banks have so far announced they’re reserving serves as a signal they’re preparing for a colossal wave of loan defaults as the economy slogs through a coronavirus-driven downturn.