S&P 500 Q1: Leverage, Taxes Leads To Lower ROE

S&P 500 (INDEXSP:.INX) return on equity for 1Q2014 dropped modestly to 16.2% from 16.3%, thanks to lower leverage and higher taxes offsetting improvement in margins and assets/asset turnover, points out a recent Goldman Sachs report.

Stuart Kaiser and team at Goldman Sachs in their report dated June 30, 2014, and titled: ”US Thematic Views” highlights that ROE dropped in seven of ten S&P 500 (INDEXSP:.INX) sectors in the first quarter of 2014.

Modest drop but remains historically high

The Goldman Sachs analysts note despite ROE dropping modestly to 16.2% in the first quarter, ROE remains higher than last year and above two-thirds of quarters since 1975. The following graph elucidates this trend: