BofA: More pain for stocks before supply chain woes end

Throughout 2021, once free-flowing global supply chains that the world took for granted have evolved into a state of chaos.

Dozens of anchored cargo ships carrying hundreds of thousands of containers now dominate the horizon off the California coast.

They’re also visible from the sky.

The image above was capture by NASA’s Landsat 8 satellite on 10 October 2021.

NASA says according to data released by the Marine Exchange of Southern California, there were 87 ships in the vicinity of the Los Angeles and Long Beach ports on that day. Twenty-seven ships were in berths and 60 were waiting offshore.

Prior to COVID-19 causing operational disruptions at the ports in 202o, a single ship having to anchor to wait for a sport at either of the major Californian ports was a rare occurrence.

It’s not just the U.S.

The situation in China is worse. Up to 200 ships are reportedly anchored in the Yellow Sea, waiting for a spot to unload cargo in the Ningbo and Shanghai Ports.

There’s also a shortage of lorry drivers across Europe which has left some supermarket shelves empty.

The logistical dilemmas have all be coupled with supply disruptions caused by weather events and shortages of materials in critical sectors such as energy and critical technology, like semiconductors.

At the same time demand has surged as economies emerge from COIVD-19 shutdowns and pent up demand is unleashed.

So, when will it end?

Chris Hyzy: More pain ahead but “equilibrium” in sight

Bank of America Private Bank CIO, Chris Hyzy has shared his organisation’s projections on how global equities will be impacted in the coming months but the supply chain chaos.

“There’s two ways that supply chains generally ease themselves in the long run. This time around the high pent up demand – the surge in demand has led to pricing pressures – a lot of that pricing pressure is because the goods or the inventory is not there,” he said during a client update.

“Eventually that surge in prices reaches a peak, either when excess savings runs itself off and the consumer and/or businesses decide they don’t want to pay the higher price anymore, or there has been an accumulation of supply where it pressures prices to the downside or it gets to a better equilibrium.”

It’s that state of “equilibrium” that Chris Hyzy believes will emerge in 2022, however he expects many global equites will still be impacted by the supply chain pressure in the coming two quarters.

“Bottom line here, supply chain discussion is top of mind, it is a feed-back loop, it is considered an anchor of the economy, globally and here in the U.S. it is supply-shortages driven, energy and labor shortages driven, and we expect better equilibrium in the next 12 months.

“But you’re likely to hear consistent discussion about the pressure of supply chains coming out of third quarter earnings announcements and it is our expectation for the fourth quarter announcements too when they’re announced early next year.”

Asia Markets Partner