Average pay for chief executives at S&P 500 companies, excluding Tesla’s Elon Musk, jumped 21% to USD 22.8 million in 2025, the highest figure since records began in the 1990s, according to the AFL-CIO’s annual Paywatch study released on Thursday (August 13).

Fred Redmond, the labour federation’s secretary-treasurer, said Musk’s Tesla package, potentially worth up to USD 1 trillion, was reshaping pay negotiations across corporate America.

“It changes the dynamic when other CEO compensation plans come up. Boards use it as a reference,” he said.

Including Musk’s award, valued by Tesla at USD 158.3 billion, the average S&P 500 chief executive took home USD 340.1 million in 2025.

The gap between executive and worker pay widened accordingly. Excluding Musk, the ratio of CEO-to-worker pay rose to 312:1 from 285:1 in 2024; including him, it reached 5,387:1. The report calculated that Musk earned the median Tesla employee’s annual salary roughly every four seconds.

Redmond said, “Our members are angry about their situation and feel they should speak out about inequality.”

Special one-off awards proved contentious elsewhere. Goldman Sachs paid chief executive David Solomon USD 118.9 million, including a retention bonus, winning support from 71% of shareholders in an advisory vote, below the market average.

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The Dow ⁠Jones Industrial Average rose 136.46 points, or 0.26%, to 52,319.20. The S&P 500 gained 58.93 points, or 0.79%, to 7,499.36, and the Nasdaq Composite gained 393.58 points, or 1.52%, to 26,213.72. For the quarter, the ⁠Dow was up about 13%, the S&P 500 gained 14.9%, and the Nasdaq rose 21.4%.

“On the Nasdaq, 2,651 stocks rose and 2,318 fell as advancing issues outnumbered decliners by a 1.14-to-1 ratio. The S&P 500 posted no new 52-week ⁠highs and no new lows while the Nasdaq Composite recorded no new highs and no new lows,” reported Reuters.

The indexes ended higher for the day as well, with the Dow registering a record closing high for the second straight day. Technology led investor and stock gains among S&P 500 sectors, with an index of semiconductor stocks finishing 3.9% higher on the day. The recovery in tech stocks will bring cheer among the investors, given the fact that a few days back, weakness in these shares massively weighed on the market, forcing both the S&P 500 and Nasdaq to register losses for the month of June.

As per the analysts, optimism over “progress” in efforts to bring the Iran war to a lasting halt has helped stocks recoup their values, despite continued military tensions.

Iran and the United States on June 17 signed a memorandum of understanding (MoU) aimed at ending the ⁠four-month-old conflict. But exchanges of fire over the last weekend have tested that agreement. Also, there is no news about Washington and Tehran beginning another round of peace talks soon.

“We’ve had a great first half of the year, certainly better than most expected. In spite of all the geopolitical stuff, the U.S. economy is performing well and corporate earnings are strong,” said Oliver Pursche, senior vice president and advisor for Wealthspire Advisors in Westport, Connecticut.

Investors, who are looking forward to second-quarter results in the coming days, will also be mindful about headwinds like a sharp rise in oil prices during the Iran war that further ramped up concerns about inflation and interest rate hikes. Even though the conflict has subsided, traders are still pricing in at least one rate hike by the Federal Reserve by the 2026-end, according to data compiled by ‌LSEG.

Investors, however, are still concerned about lofty valuations in the tech sector and continued massive spending on AI by tech companies. As per the strategists at BofA (Bank of America), cyclical, value-oriented sectors like energy and financials may end up being the better bet heading into the second half of the year.

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The pandemic, supply chain crisis, and the Russia-Ukraine war have pushed the cost of living extremely high. Food, cars, and oil prices have become very expensive, and inflation is the new buzzword. Likely, it won’t be ending so soon. Investors have already started fearing that a recession is nearby.

Slower growth squeezes profit. So does higher costs. There are many impediments to growth that businesses and consumers face in the post-pandemic economy. Debt-service prices are skyrocketing with increased interest rates. Rising wages are the biggest problem businesses face now.

The job market in America is very competitive, labour is in demand, and wages have gone up. Now corporate America wonders whether it should bear high wages and reduce profits or pass on the expenses to the consumer and contribute to the soaring inflation. More inflation means more interest rates and more expensive borrowing, which leads to slower growth. It is a vicious cycle.

It has become tedious for people to keep up with prices. People like retirees are the worst hit as they live on fixed incomes.

The Federal Reserve monitors risks to the financial system and is working to ensure that the system supports a healthy economy for US households, communities, etc.

The Federal Reserve increased its benchmark short-term interest rate by almost 0.5%. It is the largest hike since 2000.

The Fed aims to reduce consumer and business demand for goods and services. It becomes unlikely that an average US citizen can afford a new home or car in this economy.

A survey conducted on US companies shows that employers are now budgeting on an average salary increase of 3.4%, which is less than half the current inflation rate.

Inflation is moderating with Fed’s emergency steps, and demands are weakening, though the S&P 500 and Nasdaq are crashing down.

However, it is not all bad news. Some investors predict a bear-market bounce and theorize that if enough traders have sold stocks, there will be fewer potential sellers to drive prices down further. But stocks are more than demand and supply at an exchange as there are many macroeconomic factors at play.

The silver lining is with the sharp rise of bond yields, mortgage rates, spreads on corporate bonds, and the climbing dollar. Share prices have slumped, and the Federal Reserve has acted quickly to evade an economic crash. It might not seem like much, but every bit counts during a gloomy season on Wall Street.

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This happened just two months after they hit the 22,000 milestone.

This year has been full of milestones for the Dow Jones industrial average. The blue-chip stock gauge has rallied more than 3,200 points, gained more than 16% and leapfrogged 20,000, 21,000, 22,000 and 23,000 in 2017.

It was boosted by gains for healthcare firm UnitedHealth and drugs maker Johnson & Johnson, after the companies raised their profit forecasts.

The strong rally has been driven, Wall Street pros say, by a financial rarity: Economies in every corner of the globe picking up at the same time.

The Dow Jones, which tracks 30 of the biggest US listed companies, has hit new records several times over the last month on expectations of strong company profits and hopes that President Trump will win backing for his tax cut plan.

The wider S&P 500 index edged up 1 point to 2,559, while the tech-rich Nasdaq index finished flat at 6,624.

Seven of the 11 major S&P indexes were lower, led by a 0.39 percent drop in industrials and material index .

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18th October 2013

Analytical investors are always keen to invest at the right moment on a particular stock; they would look at the price earnings ratio – a common metric for valuing companies. A low P/E suggests that a stock is relatively cheap and a high one suggests it is overpriced.

Avid market participants prefer what is called the “Shiller P/E Ratio” named after Nobel laureate and Yale University Professor Robert Shiller. The Shiller P/E is also known as the cyclically adjusted price earnings ratio (CAPE) – it is calculated by taking the S&P 500 and dividing it by the average of ten years worth of earnings. If the ratio is above the long term average of 16, the stock market is considered expensive. Robert Shiller, author of “Irrational Exhuberance” who predicted the dot com and housing bubbles says the CAPE is remarkably good at predicting returns over the period of several years. CAPE stands for cyclically adjusted price earnings ratio and is constructed to smooth out corporate earnings cycles to determine if stocks are cheap or expensive- the ratio is calculated by dividing the S&P 500’s current price by the index’s average real reported earnings over the last ten years. By comparing a company’s multiple year P/E ratios to its historical average, the investor can try to decide whether the shares of a particular company are cheap without being misled by short term blips. The 10 year period is the most favoured timescale, though some people work with 3 year or 5 year histories, when doing this each year number is calculated using the previous ten years, so the end result is a moving average.

The Shiller P/E is a more reasonable market evaluation indicator than the P/E ratio because it eliminates fluctuation of the ratio caused by the variation of profit margins during business cycles. The Standard & Poor’s 500 trailing P/E now stands at 16.87, above its long term historic average of roughly 15.5. The Shiller P/E for the S&P 500, on the other hand, is 23.2. That is, 40.6 percent higher than its historic mean of 16.5, even after the recent sell off and suggests limited upside for equities going forward.

CAPE inflated by biased earnings?

Jeremy Siegel, Professor of Finance at the Wharton University says the predictions from the CAPE ratio are bearish, in an article that appeared in FT he said “all but nine months in the past 22 years the Cape ratio has been above it long term average”, and the ratio currently predicts well below average returns. He says that the claims of “bears” who say that the current earnings are unsustainably high is not true, the earnings of U.S stocks which have risen to more than 150 percent are unlikely to fall and higher P/E ratios may propel stocks even higher. Prof. Sieger says that the CAPE ratio is based on “biased earnings data”- he explains that the changes in accounting standards in the 1990’s, forced the companies to charge large write offs when assets they hold fall in price, but when assets rise in price they do not boost earnings unless the asset is sold. For example: AIG wrote down $ 80 billion which Siegel believes will skew the S&P P/E  ratio for the next 10 years. This change in earnings pattern is evident when comparing the cyclical behaviour of S&P earnings series with the after –tax profit series published in the National Income and Product Accounts (NIPA). For the 2001-02 and 2007-09 recessions, S&P reported earnings dropped precipitously due to a few companies with huge write offs, while NIPA earnings were more stable. Yet, before 2000, the cyclical behaviour of the two series was similar. Downward biased S&P earnings send average 10 year earnings down and bias the CAPE ratio upward. In fact, when NIPA profits are substituted for S&P reported earnings in the Cape model, the current market shows no over valuation. Prof Siegel calls the Cape “the single best forecaster of long-term future stock returns”. But he says the data on which it is based are now unreliable, sending out a false signal that stocks are expensive. Prof Siegel recently told CNBC that the Dow could hit 17,000 this year.

Both academicians have enthusiastic backers: Prof Shiller is defended by market bears while Prof Siegel has been embraced by the bulls.

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5th September 2013

Consider this scenario, share prices on Philippine Stock Exchange opened higher last Friday (August 3oth), extending Thursday’s rebound as positive sentiment over higher than expected gross domestic product (GDP) output in the second quarter. The PSE was up 36.80 points or 0.62 percent to 5,981.01. The surge in the prices of stocks was due to end of the month “window dressing”.

An analyst in the PSE said “We see a continued rally today due to a combined better than expected GDP growth in the second quarter and month end window dressing”.

Why is the term window dressing used and what does it imply? What are the possible repercussions of window dressing? and is it ethical for companies to window dress their holdings? – International Finance Magazine with data and factual inputs from the Wall Street Journal explains the concept of Window Dressing, the different strategies employed in Window Dressing, how does it benefit hedge fund managers, movement of a particular stock which employs the window dressing strategy and the SEC crack down on banks for understating their risk and avoiding a replica of the sub prime crisis.

What is Window Dressing?

Investopedia defines Window Dressing as “a strategy used by mutual fund managers near the year or quarter end to improve the appearance of the portfolio/fund performance before presenting to clients or shareholders. In a case of window dressing, the fund manager will sell stocks with large losses and purchase high flying stocks near the end of the quarter. These securities are then reported as part of the fund’s holdings”.

Theoretically, window dressing may make a fund appear more attractive, but the stock will tend to decline after a certain period.

For Example: Let us assume that Lucky and Co wants its balance sheet to look attractive to potential acquirers. It might do some window dressing by announcing higher sales projections in the quarter ended, double the cash in hand position and sell certain losing positions so as to display only positions that have gained in value. Financial institutions also employ another strategy of window dressing wherein they dispose off the debt from their balance sheet near the end of the quarter in a temporary manner. This will make the bank/financial institution appear to have less leverage than it actually did.

While the former is considered legal the latter is illegal.

Quoting another example that appeared in The Wall Street Journal, the stock of Iridex Corp., a maker of lasers used to treat visual ailments had been hovering around $ 3.43 all day on June 29^th., but five minutes before the market could call it a day, it took off, moving from $ 3.65  to $ 3.80. Less than half a second before the trading day and the calendar quarter ended, Iridex jumped 4 percent to $ 4.17, an unprecedented increase of 22 percent for the day. The next trading day, July 2^nd, Iridex dropped by 10 percent and did not reach $ 4 until late October.

Wall Street Journal Analysis

The unusual rise and fall of Iridex is not unusual, a Wall Street Journal analysis of daily trading in roughly 10,000 stocks since 2004 found that on the final trading day of each quarter, there was a sharp increase in the number of stocks that beat the market by at least five percentage points, then trailed it by three points or more the next day.

“Marking the Close or Portfolio Pumping”

Marking the Close or Portfolio Pumping is a form of window dressing wherein a variety of techniques are employed by asset managers wait until the waning  moments of the quarter to bid aggressively for more shares of a stock they already own, which drives up the value of their entire position in the stock. This activity boosts their performance at the very moment when they report results, making their funds look more appealing to potential investors. Even if the jump in stock price is only temporary, the managers can attract new money and earn higher fees. The Journal’s analysis compared the performance of those 10,000 stocks to the one day return of the S&P 500 index, the results were baffling, on days that didn’t end the quarter, an average of 217 stocks beat the index by 5 percentage points then trailed by at least 3 the next day. But on the final trading days of the quarters, an average of 280 stocks did.

Window dressing occurs more frequently in small, thinly traded stocks, whose shares tend to swing rigorously, according to trading and securities-law experts. With reference to the example quoted from The Wall Street Journal, Iridex has a market value of $ 36 million, making it  about 1/20^th the size of the average U.S. “micro map” small stock. The day before Iridex’s sudden rise in value on June 29^th the stock had been down 22 percent for the quarter, its last minute surge helped it close the quarter down at 5.4 percent. The company’s market value rose to more than $ 37 million, from less than $ 31 million the day before the window dressing.  The firm got richer by $ 7 million in the last five minutes of June 29^th.

Who are the Gainers?

Hedge funds make millions of dollars through window dressing; a stock jump in the closing hours of can benefit a hedge fund manager‘s fees.  Hedge funds typically collect annual fees equivalent to 2 percent of total assets and pocket 20 percent of profits. Regulators and industry experts say a fund that already has a substantial holding in a small stock can drive up the value of its entire position by purchasing as few as 100 additional shares at a premium to their market price in the final moments of trading at the end of a measurement period.

Richard Sinise, a portfolio manager at Kennedy Capital says that for hedge funds whose fees are linked to performance, “there can be that urge on the last day to put all your cash into your stocks and get them to the price you think they should be at”

SEC cracks down on banks for Window Dressing

The SEC in 2010, proposed rules designed to stop banks and other companies evading information to investors on their short term borrowings. The proposed disclosure rules would require companies to report their average and maximum short term borrowings, as well as the debt outstanding at the end of each reporting period, Directors would be held liable to explain for any significant discrepancies between the debt levels.

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