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Wall Street Is Missing the Risk to Stocks If Inflation Is Beaten

  • Falling CPI and sticky wages will lead to margin decay: Golub
  • Eroding pricing power to hurt firms as fixed costs stay high
Bloomberg business news
Summers Urges Fed to Keep Tightening

The conventional wisdom with stock bulls is that prices will take off when the Federal Reserve wins its fight against inflation. But the end of surging consumer costs could unleash another round of bad news.

A small chorus of researchers has for months warned of a potential hazard to earnings should the campaign to tamp down inflation succeed. Specifically, the squeeze on margins that could occur should an indicator known as corporate operating leverage suffer in an environment where sales flatten out.