Strong cash balances (EUR690bn above pre-crisis levels in the Eurozone and more than USD765bn in the US), as well as rising profitability and capex, are cushioning most US and Eurozone companies from high input prices – for now. But as the earnings season unfolds, the most pressing question is which firms will be able to offset higher wage bills with productivity enhancement, and bear increasing borrowing costs.

With inflation set to remain above 2% until late 2023, corporates have the leeway to withstand a moderate monetary policy tightening cycle (around +100bp). However, should commodity prices, wages or interest rates rise more than expected, we find that the construction, power, metals and the US transport sectors are most at risk of a liquidity and profitability squeeze.