TFS 19 | Financial Hardships

 

Some Companies are Absorbing Costs — U.S. Companies Bet Shoppers Will Keep Paying Higher Prices In the Long Run

Posted by CopyTeam

 

You may have noticed higher prices on the things you buy regularly, like groceries and gas. However, many consumers may not realize that economic factors such as backed-up supply chains, extreme weather events, labor shortages/higher wages, and higher demand are not currently reflected in many consumer prices.

 

Why is that? In some cases, merchants and corporations are absorbing the extra costs rather than pass them on to consumers. In situations where that is impractical, some vendors have even removed goods from their shelves rather than pay or reflect those higher prices. For example, your local restaurants may have taken favorite dishes off the menu. In fact, some chicken wing specialty restaurants are having trouble sourcing their namesake dish.1

 

However, large coffee chains like Starbucks are not yet affected by occurrences like the unusual frost on Brazil’s Arabica bean crop last July, as only 5% of the price you pay for its coffee reflects the bean price.2 Your local coffee shop around the corner, on the other hand, may have to increase prices to cover that cost.

 

According to Morgan Stanley, by absorbing higher costs to keep consumers happy, company profits are taking a hit. If supply chain and labor shortages continue, it’s only a matter of time until investors are affected. It’s a matter of balancing the threat of inflation on consumer prices against the squeeze in profit margins.3

 

Investors need to be aware that these types of factors could eventually impact their portfolios. For example, if inflation continues to rise, the Federal Reserve may increase interest rates. If companies continue to absorb elevated costs, their earnings expectations will decline and thus, so might stock prices. That’s why it’s important to have an investment advisor who stays current with economic indicators and how they can impact market events. If we feel that any of our clients are over-exposed to vulnerable holdings or sectors, we let them know. Feel free to contact us whenever you want to discuss the current market environment.

 

If you’re worried about the impact of higher prices on your portfolio, you may want to consider adding an inflation hedge, such as precious metals. It’s also important to remember that you don’t have to purchase the actual physical metals to diversify your portfolio, as they also are available via mining stocks, mutual funds, and exchange-traded funds.4

 

Given the potential for rising interest rates, some investors — particularly those nearing retirement — may want to consider repositioning high-risk assets into the bond market. In its latest market roundup, Morgan Stanley highlighted bond market opportunities that are less influenced by the direction of interest rates. Specifically, it recommends looking at U.S. high yield, mortgages and securitized assets, convertible bonds, and emerging markets.5

 

 

 

 

###

Thrive Financial Service

Call 800-516-5861

Schedule an In-person or Virtual Meeting

https://www.meetthrive.com/schedule-an-appointment

 

 

 

 

Financial Services

Tony Seskus. CBC. Sep. 7, 2021. “Why the price of chicken wings has taken flight.” https://www.cbc.ca/news/business/tight-market-for-chicken-wings-1.6155083. Accessed Sep. 29, 2021.
2 Matt Ott. The Detroit News. Sep. 29, 2021. “Why coffee could cost more at groceries, cafes.” https://www.detroitnews.com/story/business/2021/09/27/coffee-prices-explainer/5884425001/. Accessed Sep. 29, 2021.
Lisa Shalett. Morgan Stanley. Sep. 28, 2021. “Could Rising Costs Squeeze Corporate Profits?”  https://www.morganstanley.com/ideas/earnings-season-cost-pressures. Accessed Sep. 29, 2021.
Morgan Stanley. Sep. 24, 2021. “Gold vs. Silver: Key Differences You Should Know.”  https://www.morganstanley.com/articles/gold-vs-silver. Accessed Sep. 29, 2021.
Jim Caron. Morgan Stanley. Aug. 26, 2021. “Bond Market Opportunities After Peak Easy Money.”  https://www.morganstanley.com/ideas/bond-market-outlook-2021-midyear. Accessed Sep. 29, 2021.
Content prepared by Kara Stefan Communications.
 
10/21 – 1868575C

 

We are an independent financial services firm helping individuals create retirement strategies using a variety of investment and insurance products to custom suit their needs and objectives. Advisory services offered through Thrive Capital Management, LLC., an SEC Registered Investment Advisory firm. Insurance products and services offered through Thrive Financial Services, LLC. The information contained in this material is given for informational purposes only, and no statement contained herein shall constitute tax, legal or investment advice. The information is not intended to be used as the sole basis for financial decisions, nor should it be construed as advice designed to meet the particular needs of an individual’s situation. You should seek advice on legal and tax questions from an independent attorney or tax advisor. Our firm is not affiliated with the U.S. government or any governmental agency. 
Please note that we are unable to accept any trade requests via email, voice message or text. Investing involves risk, including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. None of the information contained on this website shall constitute an offer to sell or solicit any offer to buy a security or any insurance product. Any references to protection benefit or steady and reliable income streams on this website refer only to fixed insurance products. They do not refer, in any way, to securities or investment advisory products. Annuity guarantees are backed by the financial strength and claims-paying ability of the issuing insurance company. Annuities are insurance products that may be subject to fees, surrender charges and holding periods which vary by insurance company. Annuities are not FDIC insured.
The information and opinions contained in any of the material requested from this website are provided by third parties and have been obtained from sources believed to be reliable, but accuracy and completeness cannot be guaranteed. They are given for informational purposes only and are not a solicitation to buy or sell any of the products mentioned.

Leave a Comment