Expect company earnings to come under pressure
Sep 18, 2024
Yesterday, we discussed how equity markets have historically delivered strong performance in the 12 months following the Fed’s first rate cut—except in cases of recession. As one of my colleagues from the PM team, Benedikt Palmason, aptly noted, central banks lower rates for a reason. A rate cut typically signals slowing economic growth and mounting pressure on corporate earnings. Given current valuations and the projected 14% growth in US earnings for 2025, equity markets could face challenges if the Fed cuts rates as anticipated by Mr. Market. It is crucial that we remain highly vigilant moving forward.
