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(Bloomberg) — Slowing growth and relentless inflationary pressures mean there will be a big divide between winners and losers this earnings season, according to a deputy chief investment officer at BlackRock Inc.

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“Recession has been postponed but not canceled, and you can’t have inflation at these levels without seeing margin pressure on companies,” Helen Jewell of BlackRock Fundamental Equities EMEA said in an interview. 

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“Companies with pricing power are the ones that win at every point,” she said. “We expect to see that dispersion between the winners and losers this season.”

Although inflation has started cooling from historic highs, global profit margin estimates have fallen sharply as companies contend with still-high costs of labor and raw materials. In the US, analysts expect S&P 500 earnings to show a steeper drop in the first quarter compared with the preceding three months, according to data compiled by Bloomberg Intelligence. Full-year expectations have also been tempered, but market strategists warn they have room to decline further, potentially dragging equities lower in coming months.

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According to Jewell, this presents opportunities for active managers to pick up so-called quality stocks across sectors, although she declined to name any specific companies. Such firms are commonly defined as those that score highly on metrics including strong balance sheets as well as stable sales and earnings growth.

Jewell — who said in early March that she expected European lenders to extend a rally, days before turmoil at Silicon Valley Bank and Credit Suisse Group AG roiled global markets — still sees selective opportunities in the sector. Banks are “in a strong position to profit from higher rates,” while “high levels of liquid assets mean they are much more resilient than they were during the global financial crisis,” she wrote in a separate outlook note.

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In addition, the investment officer said a sharp drop in valuations of technology firms had “opened some attractive entry points across the sector.” She’s more cautious on energy stocks after their strong outperformance last year.

Worries about a recession have sparked a big sector rotation in March, with technology stocks coming back into favor as investors bet on a drop in interest rates. The tech-heavy Nasdaq 100 Index has gained nearly 19% in the first quarter, its best January-March performance since 2012. Economically-sensitive cyclical stocks are now lagging behind after a strong outperformance earlier in 2023.

“The key word is dispersion,” Jewell said. “Between those well-positioned companies, those high-quality companies, those more-profitable companies. We’re expecting to see a lot more of it as we go through the earnings season.”