Supply chain disruption is starting to wane, says JPMorgan Chase, and among those stocks that will benefit are PepsiCo (PEP) - Get PepsiCo, Inc. Report, Caterpillar (CAT) - Get Caterpillar Inc. Report, Schlumberger (SLB) - Get Schlumberger NV Report and FedEx (FDX) - Get FedEx Corporation Report.
“Global supply chain pressures are easing — if this persists, the S&P 500 should continue to deliver strong revenue growth and record margins,” JPMorgan analysts, led by Chief U.S. Equity Strategist Dubravko Lakos-Bujas, wrote in a commentary.
“S&P 500 companies delivered much stronger-than-expected results [for earnings in the third quarter] … and some key companies gave an encouraging outlook on supply chains.
“Our view all along has been that supply and labor shortages would be temporary and normalize with a decline in Covid-19.”
Further, “In recent months, we have argued that the supply chain headwind to S&P 500 earnings would be minimal, given its lower asset and labor intensity,” the strategists said.
“We believe other market segments are more levered to a supply chain recovery than the S&P 500 (e.g. Europe over the U.S., small-caps over mega-caps, goods-producing sectors over tech and healthcare).”
The analysts note that the S&P 500 already has reached their year-end price target of 4,700. As previously mentioned, “we expect the market to … reach 5,000 in the first half of 2022, assuming supply chains and Covid-19 continue to normalize.”
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