A looming recession, runaway inflation, an energy crisis in Europe and a euro that’s sunk to near parity with the dollar: corporate earnings worldwide face a laundry list of challenges this season that could create another reason to dump stocks.
After a tumultuous first half for global equities, with US$18 trillion in value wiped out, investors are anxious to see if profits are holding up or if companies will cut guidance amid the intensifying threats to demand. Businesses may use the dour economic picture to be even more conservative than otherwise about the future.
In an unusual divergence of opinions, Wall Street analysts appear to believe companies are largely in a strong position to pass on higher costs to consumers, but strategists -- more cautious after getting their forecasts for 2022 wrong so far -- aren’t convinced. They have plenty reason for doubts, with the macroeconomic backdrop deteriorating amid surging prices, higher interest rates and lower consumer confidence.