But to Liz Ann Sonders, chief investment strategist at Charles Schwab, profit margins may take a hit as companies lose their power to raise prices sufficiently enough to offset high fixed costs.
“Inflation especially early in the cycle tends to mean pricing power for companies,” Sonders said. “Demand is strong and spending is strong. That’s great news for earnings. If then you lose the demand side and you lose the inflation which helps boost prices, that’s when you can run into trouble.”
This article was provided by Bloomberg News.