Traders working on the floor at the New York Stock Exchange on Monday. The S&P 500 is down nearly 8% from its July highs as a selloff in Treasuries has pushed yields near 16-year highs, sapping investor enthusiasm for equities. – ReuterspicInvestors looking toward US 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 on Monday .
“US 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 Covid-19 pandemic-era mismatch in spending between goods and services normalises, and a tight labour 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.