Summary points of an extended piece from JP Morgan Global Economic Research on the 'fate of the global expansion'.
- Global corporate profit gains slowed less than expected due to upside surprises to real GDP and inflation
- While this resilience is supporting job and capex growth, underlying pressures on margins are building
- Our key scenarios for the outlook can be viewed through the lens of the profit cycle
- A "Boiling the frog" outturn sees profit pressures build as pricing power fades and wages squeeze margins...
- ...or pricing power remains with higher inflation that requires central banks to re-start the hiking cycle
- A "Goldilocks" scenario requires either revenue gains to offset margin compression, or productivity growth
I'm cheering on the final bullet point but suspect the "higher inflation that requires central banks to re-start the hiking cycle" is more likely. Sadly.
