Weekly Buzz: No plain sailing for global trade

11 August 2023

Shipping giant, Maersk – a bellwether for the world economy – has sounded the foghorn: it’s warning of a cloudy outlook for global trade and shipping. Despite beating expectations last quarter with some savvy cost-cutting, the company’s revenue has taken a dive, coming in at 40% lower than the same period last year. The culprit: weakening global consumer demand.

It’s a reality check for the shipping industry after three years of record growth, buoyed by strong consumer demand and previous supply shocks (Jargon Buster below!).

But now demand is weakening, and companies are playing it safe. Instead of spending on new orders, companies would rather work through existing stockpiles. And that cautious approach is mirrored in shipping rates, which took a 50% dive last quarter, now floating below pre-pandemic levels. This is based on the Freightos Baltic Index, which measures freight prices.

Maersk, which had already been steering a cautious course, is now further trimming its sails. The company is bracing for global container trade to shrink up to 4% this year, a gloomier outlook than its previous 2.5% contraction prediction.

How does this affect me as an investor?

Given Maersk ships about a sixth of all containers worldwide, its forecast typically carries weight for the outlook of the global economy. But perhaps not everyone is on the same boat – the International Monetary Fund is actually getting more optimistic about the global economy: it upped its outlook for growth to 3% last week.

So, it can be challenging to parse information when faced with mixed signals, but it helps to anchor yourself on the bigger, longer-term picture. Our General Investing portfolios powered by StashAway or BlackRock® are both diversified across geographies, industries and asset classes, allowing you to stay on course for the long-term.

📰 In Other News: US jobs miss expectations, again

The US economy added fewer jobs than expected last month. The 18-month interest rate hiking spree by the Federal Reserve (the Fed) seems to be having its intended effect, with inflation cooling and the economy still holding its ground.

This marks the second straight month the market’s undershot expectations, with only 187,000 new jobs against the 200,000 forecast – a sign that the Fed’s tightening is working. And with the average workweek now at its shortest since the pandemic began, it seems the job market might continue to cool.

The Fed has its eyes on the labour market, seeing it as a key player in the inflation game. At any rate, markets are betting that last week’s rate hike was the last one this year. After all, the full impact of rate hikes take time to percolate through the country – and we’re seeing some of the effects now.

This article was written in collaboration with Finimize.

🎓 Jargon Buster: Supply shock

Imagine a drought has wiped out the last harvest of lemons, leading to a sudden shortage. This is an example of a supply shock, which causes the price of lemons to spike. But a supply shock doesn’t just affect prices – it sends ripples throughout industries and economies. In this case, the shortage doesn’t just affect lemonade vendors, but also suppliers, distributors, and even customers, causing a chain reaction that can lead to broader economic effects.

✨ StashAway’s 2023 H1 Returns and H2 Outlook articles are both out now!

We’re halfway through 2023 now, and it’s been rather hectic. From mini banking sector crises in the US and Europe, to the emergence of AI hype – it’s safe to say that we’ve gone through a lot so far. But there’s no need to feel out of the loop, we’re here to shed some light:

Our Returns in the First Half of 2023 - For the first half of the year, we’ve taken the bull market by the horns, and safely. See how our portfolios have performed year-to-date June 2023.

2023 H2 Market Outlook - For the second half of the year, we’re taking a step back to look at the bigger, longer-term picture, and why we see silver linings for future returns.

Join our co-founder and CEO Michele Ferrario and Chief Investment Officer Stephanie Leung as they share our portfolio returns in H1 2023 and discuss the likelihood of a recession in the coming months.

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