Lower profits

We can argue for a long about the resilience of the US economy in light of a hawkish Fed raising interest rates to fight inflation. Our base case remains however the same: an inverted yield curve will eventually lead to, at least, a mild recession. This in turn will contract demand for products of US companies and hence lead to lower sales. The China reopening will only partly rescue their top-line. Lower sales inevitably lead to lower margins and lower profits as shown below. Stock markets will adjust: we stay prudent towards US stocks especially when looking at their rich valuations.