The S&P 500 Has a Tangible Net Worth Problem
The bull market is being driven more by air than by the growth in real assets.
The air up there.
Photographer: U.S. Navy/Hulton Archive/Getty Images
When third-quarter earnings reports come out in a few weeks, the bottom lines of companies in the S&P 500 are expected to be up an average of nearly 20 percent compared with the quarter a year earlier, signaling a continuation of good times for corporate America. Profits rose just more than 24 percent in the second quarter.
But another metric of financial health suggests all may not be as rosy as it first appears. The tangible net worth, or book value, of S&P 500 companies has been falling this year. The last time it had a sustained drop was right after the financial crisis in 2008. The time before that was in the previous recession in 2001.