Eyes peeled

Question: Which headwinds should investors keep their eye on?

Linda Duessel: Inflation is a very important one to watch. We believe that the peak is certainly behind us, it seems quite evident. The question will be then, where will inflation land and will that be sufficient for the Fed to stop raising interest rates and maybe avert a recession? So we're watching inflation and we're watching the Fed. As a stock market investor though, I'm very interested in corporate earnings. Corporate earnings have really surprised to the upside and even in the first quarter earnings results for 2023, though negative, surprised those who were more concerned about a bigger decline in earnings. We're expecting a mild economic recession that would be commensurate with a 10% decline in corporate earnings and so we'll be watching for that. We'll be watching to see if the earnings' declines carry on through the second and the third quarter when they can start to recover again. Because you see as inflation falls, revenue portion of the income statement can start to get hurt for companies, but their expenses and their costs, particularly when I think of wages as for an example, may be stubborn. If that happens, then that falls to the bottom line. Profit margins have been declining for five quarters now, so you like to invest when profit margins are going up, they're starting to decline now, we want to see that their earnings results show a mild economic recession and if that be the case, then we can signal an all clear there. But this is going to make it very, very interesting in the next couple of quarters as we watch for earnings results.