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Selling price inflation is decelerating quickly in defensive and domestic sectors, potentially reflecting the headwinds to consumer spending from higher fuel prices and taxes. Moreover, excess capacity in many industries, such as hotels, restaurants and retailing, are exacerbating the negative impact of softening final demand on selling prices. The message is that profit drivers have swung firmly toward global vs. domestic sectors. We continue to recommend a portfolio structure which is tilted decisively toward a durable global economic recovery. While some additional near-term turbulence may be inevitable, a leadership transition is underway: from domestic and defensive sectors to those that benefit from a reacceleration in global economic activity.
This post was originally published by the BCA Research blog.