Under the "profit margin pressure," it is difficult for US stocks to achieve a breakthrough in significant gains.
It may be more difficult for American companies to pass on price increases to consumers, while their own costs (including labor and raw materials) may increase more than revenue growth.
Tonight, the US retail sales data is coming, and economists at First Trust suggest that investors should "remain cautious in these unprecedented times," while warning that they still expect an "economic recession to be imminent."
In a report on Wednesday, economists at First Trust stated, "The Federal Reserve may have gained some momentum in combating inflation, but the inflation issue is far from over." "Worst of all, average hourly wages in August decreased by 0.5%, significantly weakening consumers' purchasing power."
S&P Struggles to Break Through
Bob Doll, Chief Investment Officer at Crossmark Global Investments, stated, "We are far from the 2% inflation rate set by the Federal Reserve." He is concerned that "inflation is declining too slowly."
Economists at First Trust stated, "The Federal Reserve's battle against inflation is not over, considering the resilience of the US job market so far, the Federal Reserve seems to have 'sufficient reason to maintain a tight monetary policy' in the coming months."
Doll from Crossmark stated that the expectations for profit growth of S&P 500 component companies next year seem too strong, and companies may face "profit margin pressure" in the third quarter.
He said, "It may be more difficult for companies to pass on price increases to consumers, while their own costs (including labor and raw materials) may increase more than revenue growth."
Meanwhile, Doll stated that the S&P 500 index may remain within the trading range of 4200-4600 points this year until investors have a "better understanding" of the US economic trend.
