Edwards: US 'profits recession' to hit equity markets

Société Générale strategist Albert Edwards has urged investors to stick with their core government bond holdings in the face of a threat to US profit margins which could hit equity markets.

The analyst (pictured) expects US businesses to see their profits squeezed in the coming months as policymakers finally initiate a round of fiscal tightening, having delayed a decision on its deficit during the winter. "The simple fact is that once the US government begins its long-delayed fiscal tightening, US profit margins will plunge," Edwards said. "US tardiness in cutting the public deficit means that the profit recession is merely delayed, not avoided." He pointed to a theory by market commentator John Hussman suggesting profit margins tend to move inversely with the sum of ...