HomeFinancial MarketsHigher Rates Affecting Profits, Goldman Analysts Warn

Higher Rates Affecting Profits, Goldman Analysts Warn

Goldman Sachs Group Inc. analysts have warned that rising interest rates are starting to have a detrimental effect on U.S. corporate profits. The strategists, led by David Kostin, observed that borrowing costs for S&P 500 companies have embarked on their fastest year-over-year rise in over two decades.

On the back of rising bond yields and lowering economic growth expectations, stocks on the S&P 500 index have fallen by about 6.5% since the start of the year. The tech-heavy Nasdaq Composite also experienced its steepest monthly decline in September.

“In the new ‘higher for longer’ rates environment, the key risk for S&P 500 ROE will be higher interest expenses and lower leverage,” the Goldman analysts observed. “A scenario in which interest expense and leverage persistently weigh on ROE would be a departure from the historical trend.”

While higher rates remain a concern, stocks that analysts have identified as having low vulnerability against rising rates include Cisco Systems Inc., Costco Wholesale Corp., Cognizant Technology Solutions Corp., Paychex Inc., and Visa Inc.

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