A striking chart from Morgan Stanley’s Adam Parker shows that 2012 earnings growth among S&P 500 companies was highly concentrated, with 88 percent of it coming from the top 10 firms. I was even more struck by the inequality within the top 10. Just four companies—Apple, AIG, Goldman Sachs, and Bank of America—together provided a majority of overall earnings growth among large-cap companies.
Perhaps it’s just a fluke result. But in the labor market we’ve seen increasing “wage dispersion” where income gains are concentrated in the hands of a small number of players, and it’s at least conceivable that large firms are going to start to see the same thing.
Keep an eye on those bank profits! Revenue growth means you’re finding a lot of customers, but it should be hard to earn profits in a competitive market. Apple makes crazy profits, but its competitors largely don’t—one company has secured a (presumably temporary) edge over its rivals and is laughing all the way to the bank. But in the financial sector you see huge profits at multiple different competing firms, a curious situation.