Profit margins are being squeezed as inflation remains high, with a slew of companies — including Walt Disney, PepsiCo and Spotify — all warning of margin pressures, weighing on earnings growth in the quarters. to be reduced. Patrick Armstrong, chief investment officer at Plurimi Wealth, believes this is the “biggest risk” to stocks going forward. He said that market expectations for next year’s S&P 500 earnings look too high, given the growing pressure. “[Earnings] downgrades can be huge. Consensus is still too high. Margin tightening is [the] Armstrong said in notes shared with CNBC. “Consumers will be squeezed by utility bills, higher mortgage costs, higher gasoline prices and there will be a squeeze on profit margins.” Last month, CNBC said inflation was “the biggest problem we all have to deal with right now.” He said wage pressures and higher commodity prices are particularly challenging and can eat away at companies’ profits. But some companies may be bucking the trend, according to Armstrong, whose Global Equity Strategy fund Plurimi AI beat the MSCI World index to rise 8.2% in October. Armstrong said: “Own it. sectors where profit margins can be protected or are creating pressure on profits elsewhere.” agribusiness that the property manager is interested in. “Consumers will face tough choices about where they spend their money, but eating out will be something they always want to spend money on,” he said. His top picks in this area are food processor Archer-Daniels-Midland, fertilizer maker Mosaic Co. , seeds and agrochemicals company Corteva , as well as agricultural machinery manufacturer Deere & Co . “I think grain prices are likely to continue to go higher. And farmers will find every acre of farmland they have. So more pesticides, more fertilizer, more farming, and more cash flow. to buy farm equipment too,” Armstrong added. Healthcare He also enjoys healthcare, which he describes as a “very stable” sector with “predictable cash flow”. It is also being traded with a reasonable multiplier, he added. His top picks in this area are the Swiss pharmaceutical company Roche thanks to its “stable cash flow” and “attractive” yields, as well as Denmark’s Novo Nordisk thanks to its leadership position in the sector. diabetes treatment. Luxury Luxury stock is another of Armstrong’s hobbies. “Luxury consumers are not suffering the same headwinds that mass consumers are suffering. [They are] not be pinched by utility bills, gas prices and mortgage costs,” he said, adding that the “huge” profit margins of luxury companies are also protected from rising input prices. In the space, Armstrong’s fund owns French luxury goods companies LVMH and Hermes, with “defendable profits” and pricing power, which refines Equinor, the oil regulator. shale operator EOG Resources , as well as BP and Shell , he noted that the companies are ” paying off debt , buying back shares and buying back shares . [distributing] dividend.”