On the eve of the release of the earnings reports of the giants, Goldman Sachs and JPMorgan Chase have been arguing fiercely about the prospects of corporate profit margins in the United States.
Strategists from two top Wall Street banks have divergent views on the outlook for corporate profit margins. Goldman Sachs strategists believe that declining inflation will boost profit margins, while JPMorgan warns that companies are rapidly losing pricing power. The disagreement between the two strategists highlights the uncertainty faced by investors.
Zhitong App has learned that there is a difference of opinion among the strategists of two top Wall Street banks regarding the outlook for corporate profit margins: Goldman Sachs strategists believe that declining inflation will boost profit margins, while JPMorgan Chase warns that companies are rapidly losing pricing power.
Goldman Sachs strategist David Kostin stated that the S&P 500 index will experience a slight increase by 2024, as companies will benefit from a faster cooling of raw material and labor costs. He added, "Concerns about economic recession and Federal Reserve tightening policies are diminishing, and the overall profitability of the index will continue to improve."
David Kostin believes that easing inflation will benefit companies with weaker pricing power and help their stocks outperform the market this year. The bank emphasized a trading strategy based on this concept and invested in stocks such as Tesla (TSLA.US), AMD (AMD.US), and Thermo Fisher Scientific (TMO.US).
However, JPMorgan Chase strategist Mislav Matejka holds the opposite view. He warns that semiconductor stocks, which are already at historically high profit margins, will suffer greatly this year in the event of an economic slowdown. In a report, Mislav Matejka stated that the profit margins of cyclical industries such as finance and non-essential consumer goods seem to be too high, and "as the positive impact of the pandemic period is absorbed, earnings and profit margins may be affected."
The difference of opinion between these two strategists highlights the difficulties faced by investors in interpreting complex economic signals and timing interest rate cuts. In the coming weeks, as more companies release their earnings reports, the situation may become clearer. Netflix (NFLX.US), Tesla, and Intel (INTC.US) will announce their earnings this week.
