“There's something to be said for the idea that inflation creates this money illusion, where the level of sales and profits remain elevated simply because prices are higher, especially relative to what might be considered a normal-sized drop in earnings associated with recession,” Mayfield and Bohnsack also said in their weekly note. The bottom-up earnings per share estimate for Q4 decreased by 5.6% to $54.58 from $57.79 between September 30 to November 30. In October and November, analysts lowered earnings estimates on S&P 500 companies for the fourth quarter by a larger-than-average margin, according to data from FactSet Research. ![]() 30-Nov.30 (Source: FactSet Research) (FactSet Research) While the third quarter has seen results that were largely better than feared, Wall Street strategists have warned of zero earnings growth ahead. On the earnings front, headliners set to round out the season include Campbell Soup ( CPB), GameStop ( GME), Broadcom ( AVGO), Chewy ( CHWY), lululemon athletica ( LULU), and Oracle ( ORCL). joined the European Union, the Group of Seven nations, and Australia on Friday in capping the price of Russian oil at $60 a barrel. ![]() The oil cartel agreed to maintain current production levels to assess the global oil market as uncertainty over China and Russia looms over the commodity. This view was shared by BlackRock Chief Executive Officer Larry Fink, who said at a conference last week that he’s confident inflation will come down - just not to the 2% level and amid a period of economic stagnation.Īt the Dealbook Summit in New York on Wednesday, Fink expressed fears of waking up in a world of “2ish-3%” interest rates with “3-4%” inflation.Įlsewhere in the week ahead, an OPEC+ meeting this weekend will place energy markets into focus. “Ultimately, we think they’ll slow the pace at which they're raising rates and then take a long time to observe the landscape and the impact that may have.” “It would likely come with some significant shakeout amongst businesses and the labor market,” they said in a note. In weekly commentary, Baird’s Ross Mayfield and Nicholas Bohnsack, president and head of portfolio strategy at Strategas, a Baird company, predicted that even if inflation continues a downtrend, the cost of getting levels from 4% to the Federal Reserve’s long-term price stability target of 2% becomes “increasingly higher.” With a slower pace and eventual pause on rates seemingly underway, Wall Street’s attention has turned to the longer term impacts of a higher rate environment on growth. “A slower pace of hikes seems appropriate from a risk management perspective, but strength in labor markets, in our view, likely means the Fed will have to lean in the direction of doing more, not less, to put inflation on a sustainable downward trajectory.” “Risks to our outlook for Fed policy are skewed toward higher terminal rates given the persistent imbalance between labor supply and labor demand,” Bofa strategists led by Gapen stated in a note released Friday after November’s hot jobs report. (Photo by Drew Angerer/Getty Images) (Drew Angerer via Getty Images)Īnd while expectations for a downshift from the 0.75% hikes delivered over the past four meetings are largely priced in, investors now wonder how much longer the central bank’s tightening campaign will last, how high the federal funds rate will go, and how long it will stay there before any cuts.īank of America projects the terminal rate to reach a range of 5.00%-5.25%, a view many of its megabank peers share, though BofA Chief Economist Michael Gapen speculated in a call with reporters last week that the rate may go as high as 6% due to the tremendous momentum of the labor market. ![]() WASHINGTON, DC - NOVEMBER 30: Fed Chair Jerome Powell looks over notes while speaking at the Brookings Institution in Washington, DC.
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