What’s happening: The recovery from the pandemic unleashed a wave of demand that manufacturers and the network of players that move items around the world weren’t equipped to handle. But after 18 months of pain, there are some signs conditions are starting to improve.
Cargo is flowing more smoothly, and the transit of goods has mostly recovered from the initial shock of the war in Ukraine, Konstantin Krebs, managing partner at Capstan Capital, an investment banking firm that works with investors in containers and container shipping, told me.
“Containers are coming back onstream, and you can feel that,” Krebs said.
And the Morgan Stanley Business Conditions Index for July, which was released on Monday, revealed “progress in improving supply conditions.” The proportion of analysts who said supply chain conditions were on the upswing climbed to 54% from 17%, while none reported a deterioration in conditions.
That said: The timeline for a full normalization is still anyone’s guess.
According to Morgan Stanley’s survey, 54% of respondents believe supply disruptions will subside in the first half of next year, while almost a third think it will take longer.
Circumstances are still changing quickly, making forecasting even trickier.
Rising infections tied to the BA.5 Omicron subvariant could cause another wave of worker shortages and clogged ports, Krebs said. The potential for fresh sanctions on Russia or another round of lockdowns in China also needs to be monitored.
A global recession, meanwhile, would reduce pressure dramatically. A plunge in demand would curb supply chain traffic much sooner than expected.
Step back: How quickly supply chains return to normal will have major consequences for inflation, which has been spurred in part by limited access to the supply of goods. Trends will help dictate the path ahead for policymakers like the Federal Reserve.
Tech companies cap hiring as uncertainty looms
Other tech firms, including Google parent Alphabet, Uber, Lyft, Snap and Twitter have also announced plans to slow or pause hiring.
Investor insight: Apple’s stock fell more than 2% on Monday. It’s down more than 17% year-to-date. That’s slightly better than the broader S&P 500, which is off almost 20% during the same period.
The news puts Wall Street on alert ahead of Big Tech earnings, which kick off in earnest next week. Apple is due to report results on July 28.
The big question: Are tech companies trying to get ahead of a potential drop in economic activity, or are they already seeing signs of a pullback in their businesses?
Apple warned in April that its revenue would take a hit of $4 billion to $8 billion due to ongoing supply chain disruptions. The strong dollar is also expected to be a major headwind.
Wall Street’s mood is grim. That’s not necessarily a bad thing
It’s no secret that investors have been in a dour mood as concerns about the rapid withdrawal of support from central banks and the growing possibility of a global recession stoke alarm.
But the latest survey of global fund managers from Bank of America, published Tuesday, reveals a “dire level of investor pessimism.”
Expectations for global growth are at an all-time low, while levels of cash on hand haven’t been this high since September 11. Allocation of money to stocks hasn’t been so thin since the 2008 financial crisis.
What it means: To some, this may actually be a signal to start buying risky assets like stocks again. Investors watch for a moment known as “capitulation,” when sentiment is so bearish that it can’t possibly get any worse. That indicates the bottom of the sell-off could be close.
“Sentiment says stocks/credit rally in coming weeks,” said Michael Hartnett, chief investment strategist at Bank of America.
Also today: US housing starts and building permits for June arrive at 8:30 a.m. ET.