That raises the questions of whether the Fed will stop hiking rates sooner than expected. The central bank has indicated that it views the economic damage caused by recent struggles in the banking sector as analogous to an interest rate hike. "Recent issues in the banking system will likely continue to be important factors in the Fed's thinking," strategists from Schwab wrote in the firm’s outlook for the second quarter.
The lingering fallout from the collapse of Silicon Valley Bank will be top of mind for investors in the coming months - especially given the uncertain path of interest rates. He adds that expectations could fall even further as the Fed works to reduce inflation by cooling the economy. "The current round of surprisingly strong economic data could see earnings growth expectations track broadly sideways for the next few months," Andrew Pease, global head of investment strategy at Russell Investments, wrote in the firm’s recent outlook. Investors have been expecting earnings to decline, and experts say that recent data indicating inflation is still stubborn and the labor market is still hot - signaling the potential for more rate hikes from the Federal Reserve - won’t improve those expectations.
"All these headwinds could point to a much more difficult second quarter."
"With the cost of capital rising, wages still high, and expectations for a slower revenue backdrop, companies are possibly facing a more stringent lending environment," LPL Financial chief global strategist Quincy Krosby said in email commentary shared with Money. (Higher interest rates make it more expensive for companies to borrow money, and thus more expensive to do business.) Recently, economic conditions - think inflation and interest rate hikes - are making it more difficult for companies to grow their earnings. Hawaii Alaska Florida South Carolina Georgia Alabama North Carolina Tennessee RI Rhode Island CT Connecticut MA Massachusetts Maine NH New Hampshire VT Vermont New York NJ New Jersey DE Delaware MD Maryland West Virginia Ohio Michigan Arizona Nevada Utah Colorado New Mexico South Dakota Iowa Indiana Illinois Minnesota Wisconsin Missouri Louisiana Virginia DC Washington DC Idaho California North Dakota Washington Oregon Montana Wyoming Nebraska Kansas Oklahoma Pennsylvania Kentucky Mississippi Arkansas Texas Invest in Gold Corporate earnings expectations in the spotlightĬorporate earnings are a key driver of stock performance.
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