Talking Point  

Investors remain concerned by global supply chain issues

Investors remain concerned by global supply chain issues
(credit: Stephen B. Morton/Georgia Port Authority via AP)

Global supply chain challenges remain a concern for investors, according to the latest FTAdviser poll.

The poll, which was conducted via FTAdviser.com, found that a third of respondents said more than three quarters of clients were concerned about the fragility of global supply chains on their investments in the long term.

Another third said the issue was of concern to 60 to 75 per cent of clients, while 33.3 per cent of advisers said 25 to 40 per cent of clients were concerned.

James Rutherford, head of European Equities at Federated Hermes, said that cost inflation and supply chain issues have been the main culprits for large companies suffering significant misses on the margin and earnings.

He said: “We have seen some large divergence between the top-line and bottom-line in a large number of companies reporting this quarter. For instance, in consumer discretionary and consumer staples sectors, we have seen companies report big beats on the top-line but also suffer from significant misses on the margin and earnings. 

"Cost inflation and persistent supply chain issues are the main culprits. In more industrials-oriented and B2B-oriented sectors, the dynamic is somewhat reversed. Industrial / B2B companies are achieving both strong sales growth and strong earnings growth in the current environment, while also reporting big order-book increases.”

But according to Scott Ruesterholz, portfolio manager, Insight Investment, the worst of energy and supply chain inflation may be behind us, hence peak CPI may “finally be here”.

However, the persistence of sticky categories will likely help keep inflation in the 5.5 per cent to 6 per cent range by the end of the year, mirroring trends across the globe.

Ruesterholz said: “Over the last few years, the idea that markets would be encouraged by an 8.5 per cent CPI data would seem ridiculous. 

“However, it may finally be peak CPI. Nonetheless, a continued increase in ‘sticky’ CPI components this month confirms to us that inflation will remain above target for the foreseeable future."

Falling commodity prices have also helped CPI to fall as commodity market retracements eased pressure on the CPI index. 

As Ruesterholz explained, energy CPI was down 4.6 per cent month-on-month, taking airfares down with it (down 7.8 per cent month-on-month).

He added: “Food inflation was the exception, remaining relatively high at 1.1 per cent month-on-month, although further commodity price falls bode well for next month. 

“Easing supply chain issues also resulted in goods categories, like appliances and used cars declining.”