Corporate Profit Margins Set to be Squeezed in Coming Months

Corporate America is bracing as macroeconomic issues weigh on profit margins. A stronger dollar, bloated inventory levels and uncertainty over the Federal Reserve’s rate-hiking cycle are all contributing factors, according to analysts. 

In the past six weeks, major bellwether firms have either reduced their forecasts or provided a muted outlook. And others are expected to follow suit. 

This comes as people are spending less and savings dwindle, as prices for nearly everything continue to soar.

Strategists from Morgan Stanley noted: “Things like inventory, labor costs and other latent expenses are wreaking havoc on cash flow. The market has started to see cracks with some bellwether stocks reporting both top-line and bottom-line misses in recent weeks.”  

The strong dollar is adding further fuel to the fire, creating challenges for companies that derive substantial revenues from overseas.