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- Corporate earnings may be on notice with rising inflation, BofA Securities says.
- Their quant framework recently ranked the consumer discretionary and tech sectors at the bottom.
- A “violent rotation” into quality stocks could follow the Fed beginning to taper its bond purchases.
- See more stories on Insider’s business page.
A slowdown in corporate earnings could be on the horizon, prompting one Wall Street shop to start recommending a move away from consumer discretionary and technology stocks.
Companies across corporate America suffered a brutal 2020, with pandemic-induced shutdowns hitting hotels, restaurants, airlines, and the like particularly hard.
Then, as the end of the pandemic came into view with vaccinations rolling out in the US, first-quarter 2021 earnings surged relative to the weak results many companies reported a year earlier when COVID-19 first took hold. Members of the S&P 500 ended up posting the highest level of year-over-year earnings growth in the first quarter since 2010, according to FactSet.
The resurgent growth that some companies saw may not last for long, though.
Equity and quant strategists from Bank of America Securities, led by Managing Director Savita Subramanian, wrote in a June 14 research note that a potential tax hike from Washington, D.C., high valuations, and rising inflation could soon hurt earnings –…
