The Limits of Market Gains from Supply-Chain Strains

The Strait of Hormuz is closed. For how long? The Strait of Taiwan is open. For how long?

Key Takeaways

• Supply Strains Driving Crowded Gains: So far, the resilience and adaptability of global supply chains through the tariff chaos and military action have been surprisingly strong. But episodes of shortage and speculative hoarding, as we saw in industrial metals last year, have also triggered crowded trades that eventually faced some corrections. Financial markets increasingly seem to be operating on two instincts: buy the dip, on the assumption that tough talk will not translate into anything catastrophic, and chase the trades gathering around global choke points. This is a fragile mix as economic pains mount.