The Fed's war on inflation is hitting the profits of S&P 500 firms, Goldman Sachs says

• The Fed's aggressive interest rate hikes have weighed on S&P 500 profits, Goldman Sachs said.
• The index's return on equity, excluding financial firms, has slumped 69 basis point this year.
• Higher for longer interest rates could derail the index's long-running trend of ROE growth.

The Federal Reserve's war against inflation has taken a toll on the profitability of S&P 500 companies, with the first half of this year seeing the effect of higher interest rates firmly set in, according to Goldman Sachs strategists.

The return on equity ratio for the S&P 500 has continued to slide since peaking in the second quarter of last year, according to Goldman strategists. The ROE for the index, excluding financial stocks, fell 69 basis-points this year to 23.4%.