Ever since investors started expecting persistent inflation, the key earnings question for much of Corporate America was “can they pass on these costs to the consumer?” And thanks to the prolonged effects of fiscal stimulus, higher nominal wages and the wealth effect, they did. That boosted margins, and therefore stocks. Today’s Chart of the Day shows the S&P 500 forward operating margin going back to the start of the Covid-19 pandemic. It looks remarkably like a chart of the benchmark U.S. equity index. But now, thicker margins are no longer driving the stock story. The selloff has largely become about valuations in the context of higher prices, while margins themselves (still hovering at record highs), are just now starting to slump perhaps proving those worried about inflation right.