Manufacturers are under immense pressure as the rising prices of raw materials coupled with ongoing labor shortages continue to hamper the global supply chain.
As the holiday season approaches, concerns are growing over the shortages of key manufacturing components, extreme order backlogs, delivery delays, a spike in transportation costs, and consumer prices.
While no single factor can be solely responsible for current supply chain shortages, the global economy is severely affected by similar conditions across borders.
Western economies have emerged from lockdowns and are anxiously awaiting a multitude of finished products, raw materials, and components from longtime suppliers in Asia and elsewhere. The continued complications in the supply chain are causing higher inflation in the U.S. and several countries in Europe, thereby impacting consumer spending.
Automotive Industry
According to the Los Angeles Times, Global industry consultant AlixPartners announced the global auto industry would lose production of 7.7 million vehicles world-wide, roughly 10% of the expected production for 2021, because of shortages in micro-chips and other component parts.
This loss of production and sales is projected to cost the global automotive industry $210 billion in lost revenue this year. Globally, more than a quarter of German automotive companies have had to reduce or completely halt production because of the sharp decline in automotive parts and available workers.
No one can predict when labor shortages and supply chain delays will ease but investors will rejoice when conditions inevitably improve.
Nevertheless, despite short-term economic disruptions caused by persistent supply-chain issues referenced above, market strategists, including those at Charles Schwab, note various favorable factors to consider when looking at the market overall. These include:
- Compelling value in equities relative to bonds
- Exploding consumer demand and pricing power
- Strong corporate earnings, particularly among cyclical (i.e., economically sensitive) firms
- Decreasing uncertainty and market risk related to the Delta variant
According to Charles Schwab’s Center for Financial Research, the composition of earnings across sectors speaks to corporate resilience and potential.
For long-term investors, short term market declines can actually be quite beneficial, in fact, signaling a good time to buy at attractive entry points.
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Past performance is no guarantee of future results and the opinions presented cannot be viewed as an indicator of future performance. Forecasts contained herein are for illustrative purposes, may be based upon proprietary research and are developed through analysis of historical public data.
The information here is for general informational purposes only and should not be considered an individualized recommendation or personalized investment advice. The investment strategies mentioned here may not be suitable for everyone. Each investor needs to review an investment strategy for his or her own particular situation before making any investment decision.