Money

Will the supply chain stall Santa’s sleigh?

Image source: Gerhard G./Pixabay

Global supply chains are still problematic for businesses, consumers and investors

There is Thanksgiving in the rearview mirror and the holiday season is upon us in all asset class markets. The end of 2021 will occur when the market faces central bank tightening, tax increases, and the prospect of new emergence of another COVID-19 variant.

On Friday, December 3rd, the latest employment report had good news. The unemployment rate has fallen to 4.2% and wages have risen. The bad news is that the private sector only created 210,000 jobs in November, while the market forecast was 573,000. The stock market didn’t like the report. All major indices have fallen, with VIX rising above 35 to the highest level since early February 2021 and settling above 30.

The holiday season is when consumption peaks. Supply chain issues continue to plague businesses and consumers, but they are a problem for investors.

Supply chain will be a problem until 2022

Profit matters when a company cannot deliver consumer goods

  • Supply chain issues continue to weigh on corporate profits.
  • Many companies have issued warnings about profits.
  • Shipping costs are at their highest level in a few years. Logistics and employment costs are high.
  • The employment situation is improving, but it has not reached the level expected by the market. Companies have to pay more to reduce their productivity.

Higher taxes and interest rates are imminent

  • The Biden administration plans to raise corporate and some personal taxes in 2022.
  • Federal Reserve Chair Jerome Powell told Congress last week that he would support accelerating the tapering of quantitative easing.
  • Early termination of QE accelerates the lift-off from the zero percent federal funds rate.
  • Higher interest rates make debt financing much more expensive. At $ 30 trillion, every 25 basis point increase costs $ 75 billion annually.

It wasn’t a problem, but when will the fix be made?

  • All major stock market indices fell last week and closed at or near the recent lows.
  • Crude oil lowered the elevator shift after OPEC + decided to cut 400,000 barrels / day in January.
  • Cryptocurrencies have fallen while bonds have skyrocketed towards quality purchases.
  • Gravity began on November 26th and continued until December 3rd.

Follow those trends-choosing bottoms or tops is a dangerous game

  • When they move, markets tend to rise or fall to levels that go against logic, reason or rational analysis.
  • Choosing a high or low price has nothing to do with ego and nothing with profit.
  • Trends reflect the wisdom of the crowd and are always the best friends on the market.
  • Track crowds and trends in the coming days and weeks. The path with the least resistance in the market is the function of collective wisdom.

Thanks for reading and stay tuned for the next edition of Trader Rundown!

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Equity News Contributor: Tradier Inc.

sauce: Equity news

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