Healthy corporate profit margins and unleveraged balance sheets to offer support

This J.P. Morgan global equity strategy report focuses on corporate profit margins and balance sheets across the US, Europe and Japan. It argues that corporate profit margins are generally very healthy and above long-term averages, and that corporate balance sheets remain underleveraged, with net debt-to-equity ratios typically 20-40% below historical averages. The breakout in Brent above $100 and the rise in bond yields, with the US 10-year near 5%, have weighed on equities, but the damage is limited, with the S&P 500 down 2% and Stoxx 600 down 4% from record highs, consistent with a market digesting an oil and rates shock rather than repricing a collapse in earnings. Profit margins have historically peaked well ahead of downturns, averaging 8-9 quarters, and Q2 margins made fresh highs, so both a sustained equity top and an economic downturn look unlikely over the coming quarters. Earnings breadth is broadening, with over 80% of MSCI World companies expected to post positive EPS grow