Home Entrepreneur The world is evolving too fast for global supply chains

The world is evolving too fast for global supply chains


April 20, 2021

6 minutes of reading

This story originally appeared on ValueWalk

Inside of him Daily market notes report to the investors, while commenting on global supply chains, Louis Navellier wrote:

Q1 2021 hedge fund letters, conferences and more

Performance deviation

Yields on the 10-year bond, which ended March at 1.74%, hit a low of 1.53% last week in a surprising move despite various reports showing inflation. higher proportional and very strong economic activity. Various assumptions have been made for why this counterintuitive change occurs, from short selling to foreign buying interest, to the feeling that economic growth and income. is getting close to “as good as it should get” for this time in the cycle.

I think a better explanation of why the bond market staged a weekend rally of how well $ 271 billion in New Treasury supply was auctioned off. The boom in deficit spending weighed heavily on some previous Treasury auctions, so that has turned into a bearish story, but strong demand for Debt of America has reduced yields and the dollar, stimulating risky capital inflows into equities to take markets to new highs.

The elimination of the return risk to the investment landscape means the rally can sustain its overbought and persist for a while. Markets have believed the Fed rhetoric that any concept of cut has not been considered for a while, so interest rates will remain historically low relative to inflation. Early Q1 results showed that firms were beating estimates of increased earnings and inflation-adjusted earnings more appealing in stocks than in the Treasury currency market.

One thing is for sure: stock market is “all” about what the Fed is marketing in its fiscal policy, and their internal indicators provide a very confident tone of voice whenever Fed Chairman Powell or other Fed members speak up. But, more importantly, the charts show that the stock market is more inflation-tolerant than the target range of 2%, as long as work continues to increase and income keeps pace.

Investors should never lose that the United States is a consumer-driven economy, where the cost of living promotes emotional and ultimately emotional market trends. Hitherto, “Temporary” is the buzz word for 2021 – not just for inflation, but also for stocks and bull markets. Until the Fed decides on another keyword to stick to inflation, the path of least resistance to the S&P 500 will be higher.

There are a few terms “inside Las Vegas” for gamblers who have lost their senses and are working towards elimination. Congress may be sensitive to such names, except they never have to worry about being removed. There is always more paper at the Department of Engraving and Printing.

Government Financed Deficits Spending soared

This is not the time to raise the huge deficit for the government Mainly based on transfer payments, but that’s what they’re doing. As economist Ed Yardeni wrote last week, “Washington is on the right track. Financial deficit government spending has skyrocketed beyond faith ”. Here are some new statistical facts:

  • The budget deficit in March was $ 660 billion, a record high for the month and 455% higher than the deficit of 119 billion USD in March last year. Expenditures are $ 927 billion compared with income of just $ 268 billion.
  • April won’t be much better because, once again, the IRS has postponed the tax deadline to May.
  • The deficit in the first six months of Fiscal 2021 (which started October 1 of last year), reached a record 1.7 trillion dollars, up 130% from a deficit of 743 billion dollars in the same six months. Fiscal year 2020 period.
  • The total US federal budget deficit hit a record $ 4.1 trillion, in the past 12 months through March. Spending increased by $ 3 trillion (+ 65%) to $ 7.6 trillion, with no real growth in revenue.

Last week’s CPI announcement was quite hot but it could be clearly explained as “transient”, causing Treasury markets to rise and yields to fall. I believe that Japanese and European financial institutions will continue to buy US financial instruments, because there is simply no interest in Japan or Europemaking U.S. dollar-based transportation the only option. However, that does not mean that Treasury yields will rise above inflation, which is expected to rise faster.

The Consumer Price Index rose last month at a 7.2% annual rate and it is likely to be higher (0.6% monthly increase multiplied by 12 months, yielding a 7.2% annual rate. But it would be even higher if compounded monthly). Needless to say, if I expect inflation to rise further once the economy reopens, I wouldn’t expect a significant drop in Treasury yields. I think we’re more likely to see treasury rates above 2% by the end of the second quarter, despite last week’s drop.

Issues for the global supply chain

The world is evolving too fast for global supply chains. Taiwan accounts for about 65% of the world’s semiconductor production, but the worst drought in 50 years is proving to be very challenging for semiconductor manufacturing, which requires a lot of water. There are three major industrial parks in Taiwanwhere most of its semiconductor chips are made. Large companies have had to limit their water consumption. One large chip company has arranged trucks to carry additional water supplies, while another is exploring the use of groundwater.

Another expected industry crisis is a shortage of lithium batteries. VW Group announced, during “Power Day”, that high-grade cobalt-based lithium batteries, in limited supply, will be destined for the company’s premium vehicles, such as Porsche, while non-cobalt-free batteries will be used in types have lower prices tram (EVs).

Obviously, the Fed has succeeded in boosting inflation, but now we have to see if this inflation is “transient”, which is how the Fed described it before.. So far, the inflation news has basically been in line with economists’ expectations. If you are worried about future inflation, this is a good time to invest in growth stocks that have higher returns than the inflation rate, as stocks are often a major hedge against inflation.

In China, wholesale inflation is on the rise. The National Bureau of Statistics of China announced that their producer prices had risen to 4.4% annually in March. In China, although the manufacturing sector recovered strongly there, Chinese household spending did not recover as quickly as it did in the US.

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