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Margins at 'peak levels': economist

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While governments around the globe battle with bond markets and implement stiff austerity measures to tame budgets, companies have been sitting on trillions of dollars in cash and growing their earnings. But Marco Lettieri, an economist at National Bank Financial, tells BNN that the fuel to the corporate earnings fire may soon run out.

"Over the last two years we've seen profit margins surging in Canada…it helped earnings grow faster-than-expected," he says. "The profit margins are at extremely elevated levels right now -- peak levels from my view."

Lettieri says that because margins are likely to pull back in many sectors, investors will have re-evaluate their expectations.

"We expect the economy to grow in 2012, however, earnings growth will be limited by its expansion due to the fact that profit margins are peaking and in some sectors have already turned over…earnings expectations will have to come down somewhat in the coming months."

Lettieri says investors should look at sectors such as energy, consumer staples and utilities where margins have yet to peak.

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