Great Margins, but What Lies Ahead?

French Wolf & Farr’s Investment Commentary to clients was excerpted by Barron’s Oct. 3, under the headline, “Great Margins, but What Lies Ahead?”

The September client note by FWF focused on the perilously weak economic backdrop and the somewhat paradoxically high levels of profitability.

As more investors begin to understand the challenges facing the economy and the likelihood that margin contraction leads to weak future profit growth, it is difficult to envision a scenario where broad equity indices post significant durable gains, wrote Dorsey Farr, co-founder and portfolio strategist for FWF, in a summary of the Investment Commentary.

Still, FWF believes pockets of opportunity exist. If weak growth and low yields persist, many investors will need to reconsider their investment strategy and begin to embrace “boring” stocks and credit instruments as equity substitutes, said Farr.

Publication: Barron’s