BlackRock warns of US earnings stagnation, remains bullish on AI, Japan

NEW YORK, Oct 23 - Investors looking toward U.S. corporate earnings growth to revive the rally in the benchmark S&P 500 may be disappointed as inflation remains volatile, strategists at the BlackRock Investment Institute warned in a note Monday.

"U.S. corporate profits have plateaued along with the economy," the firm noted."Broad equities have started to adjust to the new regime of greater volatility, but don’t fully reflect the macro damage we expect." Among the risks it sees for equities are the loss of company pricing power as the pandemic-era mismatch in spending between goods and services normalizes, and a tight labor market pushing wages up and keeping inflation above the Federal Reserve's 2% target rate.

Companies in the S&P 500 are expected to post earnings growth of 1.3% in the third quarter compared with the same time last year, according to LSEG IBES. That would mark the first pickup after three quarters of flat or declining earnings growth.

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