Report: Major American companies are exposed to after the Federal Reserve raises interest rates

Report: Major American companies are exposed to after the Federal Reserve raises interest rates
Report: Major American companies are exposed to recession after the Federal Reserve raises interest rates

American companies have begun preparing for a as FedEx last week surprised Wall Street with a huge profit warning and a tepid outlook for the global economy, in light of the Federal Reserve’s aggressive interest rate hikes, which are expected to continue, which contributes to fueling Recession fears, according to CNN.

FedEx isn’t the only company raising the alarm about a recession.

“Anyone who thinks we’re not in a recession is crazy,” the CEO of upscale furniture retailer RH said in an unusual earnings call earlier this month, adding that the housing market downturn “has just begun.”

Best Buy’s chief financial officer confirmed at the end of August that he expects sales growth to continue to slow. While the company avoided using the term recession, the company’s chief financial officer said: “There is a belief that current macro-environment trends may be more challenging… for the rest of the year.”

The CEO of PVH, which owns the Tommy Hilfiger and Kelvin Klein brands, noted in late August that “rising fuel prices and other inflationary pressures are starting to affect consumer discretionary spending” over the summer, adding that the shift “was more pronounced for us with consumers with higher middle income and most profitable in North America”.

These signs are ominous, and more companies are likely to signal a further slowdown in the economy. Most US companies operate on an annual earnings schedule, which means they will report third-quarter results in October.

Major companies will announce their results next month

Tech giants like Apple, Microsoft and flagship , Coca-Cola and Procter & Gamble, McDonald’s and banks like JPMorgan Chase and Goldman Sachs are just a few of the big companies to release their results next month.

According to estimates tracked by FactSet, the change has been dramatic. On June 30, third-quarter earnings were expected to rise nearly 10% from a year ago.

But as companies and analysts cut their forecasts, forecasts now point to a profit increase of only 3.5%. This will be the worst quarter for earnings since a 5.7% drop in the third quarter of 2020, when the economy was grappling with COVID-19 lockdowns.

John Butters, chief earnings analyst at FactSet, notes that the magnitude of the change in earnings estimates is the largest since the second quarter of 2020, when many companies first entered shutdown mode.

Concerns that a global rise in interest rates will further slow profits

Moreover, other global central banks, including the European Central Bank and the Bank of England, are also in a tightening mode. This adds a risk that the global rise in interest rates will further slow down profits, consumer spending and the general economy.

It is worth noting that not all recessions are “major” recessions, such as the year 2008. The US economy experienced milder recessions in 1990 after the rise in oil prices during the first Gulf War and in 2001 after the collapse of the internet bubble known as the “dot bubble” -com”. The Covid recession in 2020 only lasted two months, the shortest downturn on record.

There is one potential bright spot. The US real estate market is expected to slow, despite concerns about rising prices and higher mortgage rates, but it won’t collapse as it did during the 2007-2008 mortgage crisis.

The article is in Arabic

Tags: Report Major American companies exposed recession Federal Reserve raises interest rates

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