JP Morgan AM: US profit margins to remain under pressure

JP Morgan AM: US profit margins to remain under pressure

November 13, 2023

United States
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The US earnings season has nearly finished with 90% of the S&P 500 by market cap having reported results. The story this quarter has been of margin resilience.

Margins have been under pressure since their high-water mark in 2021, but a combination of falling input costs and continued consumer spending has meant the downward trend stalled in the third quarter. We expect this resilience to fade in 2024, as the economy slows, demand softens, and pricing power weakens.

Consensus estimates currently see earnings growth of 11% for the S&P 500 in 2024, which includes an expectation that margins will not just hold at current levels but will actually expand again. We therefore see downside risk to earnings forecasts ahead. With limited room for US index valuations to absorb earnings downgrades, this points to the potential for further market volatility ahead. 

13112023 JP Morgan AM

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