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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

Go deeper

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Amazon's new spherical Echo smart speaker. Screenshot: Axios

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Why it matters: Amazon, like rivals Google and Apple, typically gives its consumer hardware a launch ahead of the holidays. Apple has already introduced new iPads, while Google has scheduled a Sept. 30 event, where it is expected to debut new audio and video gear, alongside updated Pixel phones.

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Illustration: Aïda Amer/Axios

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Coronavirus dashboard

Illustration: Sarah Grillo/Axios

  1. Global: Total confirmed cases as of 11 a.m. ET: 31,937,244 — Total deaths: 977,624 — Total recoveries: 22,013,874Map.
  2. U.S.: Total confirmed cases as of 11 a.m ET: 6,937,145 — Total deaths: 201,959 — Total recoveries: 2,670,256 — Total tests: 97,459,742Map.
  3. Health: The coronavirus is surging again — Johnson & Johnson begins large phase 3 trial — The FDA plans to toughen standards.
  4. Media: Pandemic spurs journalists to go it alone via email.
  5. Technology: The tech solutions of 2020 may be sapping our resolve to beat the coronavirus
  6. Sports: Here's what college basketball will look like this season.

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