- Because absolute valuations are high by historical standards, stocks are generally vulnerable to multiple compression should there be even a hint of unchecked margin pressure, let alone earnings disappointments.
- Even a modest rate of inflation could have a substantial negative impact on margins and earnings if not quickly offset with higher prices and/or other cost reductions.
- The average company doesn't have the ability to quickly address higher input costs with offsetting higher prices.
For further details see:
Pricing Flexibility In An Inflationary Environment