Could supply chain constraints be the next setback in the market?
Brain Sozzi gives his latest hot take as he makes the case on why supply chain challenges could be the next major problem for the stock market.
Video transcript
- Welcome back to Yahoo Finance. Let's start off your week with a little bit of spice. And it's time for our Hot Takes. So I want to go first to Brian Sozzi because you kicked off this week with a Morning Brief titled "Here is the Next Problem for the Stock Market." And Brian, I'll let you give the grand reveal for what that next problem is.
BRIAN SOZZI: Yeah. Real, real clickable headline, really. Shout out to my editor Amanda Fung, who's always just crafting amazingness for this newsletter. But yes, at-- I write at length about the newsletter. It's in the newsletter. It's on the Yahoo Finance homepage right now about the next biggest risk to the market is supply chain challenges.
I just do not think this is priced into the market in any way whatsoever. Look what we heard from Nike last week. They can't even get goods out of Vietnam because of the COVID situation. What did their stock do on earnings day? It declined. FedEx said it has labor shortages, in addition to dealing with large pockets of inflation for the workers it is hiring. That is a supply chain challenge.
They cut their outlook last week. Nike cut its sales outlook. Both those stocks finished the week in the red. FedEx finished last week-- the stock was down close to 11%. And we hear a lot of bulls coming on the show saying, it's all priced into the market. Government shutdown is priced into the market. Supply chain challenges are priced into the market. Crypto, who knows? Below 30,000, priced into the market, Brian. Everything's great.
And I'm here to say, no, it's not. I look at the valuation on the S&P 500. At 22 times forward earnings, those are levels not seen since 2001. Now, I may be mistaken here, Julie. Back in 2001, there was no health pandemic wreaking havoc on global supply chains. Secondarily, I look at earnings estimates as by the S&P 500 analysts.
They're looking for third quarter growth close to 30% despite the supply chain challenges. That is ridiculous. I encourage all analysts to pay greater attention to what companies are saying right now on their early innings earnings calls. Because the supply chain challenges are real. They will not end overnight. And I don't think it's priced in.
