According to a detailed report prepared by Farah Elbahraoui for Bloomberg News, investors and companies are increasingly concerned about the impact of the Middle East conflict on their operations: the boycott is affecting sales and disrupting Red Sea shipping lanes, creating significant risks. Bloomberg argues that this situation threatens the ongoing rally in U.S. stocks, as mentions of the Red Sea and "geopolitics" in earnings reports have approached the total for the past three months.
Earnings expectations for S&P 500 companies over the next 12 months have risen to an all-time high, according to a Bloomberg analysis. This #optimism is based on a scenario in which the U. S. economy beats expectations and a Federal Reserve rate cut becomes possible. However, Bloomberg notes that any serious threat to earnings or signs of renewed inflation could jeopardize the rally that has driven the U. S. benchmark to record highs.
According to Bloomberg, the conflict between Israel and Hamas has driven oil prices higher since the beginning of the year due to fears that the conflict could escalate. Container ships are changing routes to avoid the Red Sea and Suez Canal after attacks by Iran-backed Houthi rebels seeking to disrupt Israel's logistics and supply #chain, according to Bloomberg.
Nicole Konitzer told Bloomberg that the geopolitical backdrop is a risk that could affect corporate earnings and lead to inflation, especially if the situation doesn't change. The Bloomberg article cites data from Bank of America Corporation's latest survey of fund managers that shows investors see geopolitics as the second biggest risk to stock prices after inflation.
European companies such as Heineken NV and adidas AG also expressed concerns to Bloomberg about geopolitical and macroeconomic developments affecting their businesses. In particular, adidas AG noted that tensions in the Red Sea will increase supply costs in the short term.
According to Bloomberg, #Tesla Inc. announced a temporary halt in production at its plant in Germany due to supply disruptions. Companies such as ResMed, Cisco Systems and Albemarle have experienced higher shipping prices and longer lead times, indicating the pervasive impact of the dispute.
However, according to Bloomberg, some companies have found positives in the disruptions.
Read us at: Compass Investments