US Stocks Will Confront an Earnings Recession by the End of 2022
- US firms’ profit margins to come under increasing pressure
- CEO sentiment, weaker global trade point to falling earnings
Source: Getty Images
There are pervasive, and increasingly pronounced, signs that US equities will be in a profit recession before the end of this year. Target Corp.’s warning on margins yesterday is emblematic of the problems faced by firms in an inflationary regime. Even if an economy-wide recession is avoided, the backdrop for equities is set to get worse before it gets better.
Inevitably -- given the unequivocal message from leading indicators earlier this year -- the emphasis in the market debate has shifted from inflation to growth. Higher rates and tighter liquidity have a more immediate effect on growth, and, while inflation has yet to conclusively peak, growth is beginning to show the cracks you’d expect in the face of a Fed on the warpath.