Market Musings 11/3/2021
Quick thoughts on the markets and major portfolio news. Not on Ursa yet? Download Ursa from the App Store!
We expect supply chain improvement starting early next year, but unfortunately, #SupplyScare is likely peaking in the all-important Q4 holiday season.
It was a recurring theme this #earnings season. Company after company reported strong profits despite revenue missing blamed on the supply chain. #SupplyScare has been building up since #COVID19 started and looks to finally crescendo in the Q4 holiday season.
It started with manufacturing disruptions due to #COVID19. One of the most talked about has been the semiconductor shortage. Semiconductor manufacturing is complex with long lead times－abruptly starting and stopping without the ability to adhere to strict processes is extremely disruptive to production. Given lead times and inventories, we didn’t see immediate impact to end products like computers, smartphones, tablets and cars. However, today, #SemiShortage causing production cuts from the new iPhone 13 to cars stuck in factories fully-built waiting for microchips.
Even if manufactured, the supply chain disruption didn’t stop there. Labor shortages significantly impacting shipping and transportation for both ship crews and port workers. Similar to other front-line workers, higher wage demands from increased #COVID19 risks especially from destinations where pandemic not under control. Congested ports causing shipping delays with products just sitting in containers on ships without enough workers to unload.
Digital advertising outlook cuts at social media companies signal retailer expectations are low for Q4. Given consumer demand trends remains strong, the cuts likely driven by lower supply expectations. Given supply/demand dynamic, we wouldn’t be surprised for some #InflationFears price bumps for the limited supply available. It definitely dampens #COVIDRecovery momentum near-term. We expect supply chain improvement starting early next year, but unfortunately, #SupplyScare is likely peaking in the all-important Q4 holiday season.
We think #SupplyScare Q4 impact baked into market expectations now and looking towards supply improvement pace next year. In the meantime, we recommend you buy holiday gifts early and stock up some toilet paper… 🙃
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The statements, opinions and analyses presented here are provided as general information. This article is the opinion of the author. Anything within this article should NOT be considered an investment recommendation or advice. See Ursa’s full disclosures here.