The recovery of jobs lost in the pandemic has masked what has proved tepid job growth. We see companies facing higher labor costs from lifting wages to attract fewer available workers: The workforce is 4 million smaller than it would have been if it had kept growing at its pre-Covid pace, we find. Firms may struggle to pass on persistent labor costs to consumers: The share of businesses reporting higher prices for their products is the lowest since January 2021 (dark orange line), NFIB data show. The consensus for profit margins looks too rosy – our first takeaway from Q2 earnings (green line in chart). Margins ticked up in Q2, so earnings topped low expectations, partly from companies benefitting from lower input costs. earnings have stagnated over the past year as pandemic-driven spending shifts normalized, squeezing profit margins. equity market this past quarter, which also contributed to European equities losing the relative outperformance earlier in the year, when European exceptionalism was contributing to performance. If you look at the absolute year-on-year growth, European equity market versus the U.S., European earnings have contracted twice as much as U.S. And the answer is also yes, as they surprised versus the even elevated expectations, which is why they continued to hold up in terms of performance.Īnd the third point I would note is around regional nuance. I am specifically paying attention to if tech names are able to meet the very high bar as they came into this reporting season. Which in the context of labor’s greater share of the pie is not entirely surprising.
So, looking at what has been contributing to earnings upside, we are talking about typically early-cycle sectors like consumer discretionary, for example. The second point I would note is this huge dispersion and the importance of selectivity that came through in the earnings picture as well.
But, looking ahead headwinds to margins include labor shortage, tight supply as well as sustained wage growth. So, heading into this season, I was paying very close attention to if companies are able to keep and maybe even grow their margins, and the answer is yes. Opening frame: What’s driving markets? Market takeĮarnings have been stagnating and this past quarter, they came in better than feared. BlackRock Global Chief Investment Strategist
0 kommentar(er)
