OCTOBER 2023

WHATS NEW?

Good Morning, Good Evening, and Goodnight,

Welcome back to another market update! In this journal I’m going to talk about supply chain current events, freight, PMI, technological advancements, and the stock market.

The sole purpose for me to do this is to spark a conversation with you in the future and maybe gain perspective of your thoughts and insights.

“Money is like gasoline. It gets you where you want to go, but it’s not the destination.”

That being said let’s jump into where the markets are:

October PMI score of 49.1 This is a slight improvement from the September PMI of 48.9, but it still indicates that the manufacturing sector is contracting. (PMI>50 indicates that the manufacturing sector is expanding, PMI< 50 indicates that the sector is contracting.)
Average price of crude oil per barrel this month$92.22. This is up from 84.72 USD last month. Rising inflation is putting pressure on businesses, as they are paying more for their inputs and having to pass on these higher costs to consumers. This is leading to weaker demand for goods and services, which is weighing on the PMI and the stock market.
Technological advancements, such as the use of AI and Machine learning are helping businesses to improve the efficiency of their supply chains. This is helping to reduce costs and improve customer service.

Dealing with freight transport on a daily basis provides an intriguing perspective on the ever-changing landscape of shipping rates. It’s quite interesting to see the varying costs that customers incur when moving their products from A –> B. My time working as a broker has allowed me to build a strong network of contacts, including owner-operators, large trucking companies, and dispatchers. However, I have observed that most businesses in the trucking industry are struggling to make a profit, with the exception of customers and original equipment manufacturers (OEMs). This is due to a number of factors, including rising costs and increasing competition. As a result, many businesses are consolidating or going bankrupt.

Dry van spot rates were flat m/m in September. DAT dry van contract rates are $2.05 per mile, increasing 1¢ m/m in September, down 16% y/y. Reefer spot rates fell 1¢ m/m in September. Reefer contract rates are $2.39, flat m/m and down 11% from a year ago.
The National Retail Federation is forecasting that holiday retail sales will be up only 2% to 3% in 2023, which is below the historical average. This suggests that freight demand will be weaker than usual during the holiday season. (2020 had and 8.3% increase from 2019 and 2021 was up 14.1%. We can expect a 2-3% increase for 2023.

This transitions this next part the journal: Market correction.

The month of October 2023 has been marked by a series of events that have stirred the US markets and raised concerns about a potential market correction. High interest rates and inflation have been key factors, and the Federal Reserve has been hiking interest rates to combat inflation. This has made borrowing more expensive for businesses, potentially hampering investment, and growth. On the consumer side, higher prices can reduce spending, further slowing economic growth.

The Tech-heavy Nasdaq Composite sank 0.5%, falling even further into correction territory. It is now down more than 10% since its most recent high in July. This suggests that some stocks may indeed be overvalued, and this is just a small correction that was overdue. In the commercial real estate sector, the shift towards remote work during the pandemic has led to rising office vacancy rates and declining rents. The growth of e-commerce has similarly affected Retail real estate, with increasing vacancy rates and falling rents due to the decline of brick-and-mortar stores.

Geopolitical tensions have also added to market uncertainties. The ongoing conflict in Ukraine has led to higher energy prices and supply chain disruptions. As well as the conflict that is happening with Israel and Palestine. The United States government has responded by providing substantial aid to Ukraine, with a total of $61.4 billion requested for aid to Ukraine. In Israel, amidst conflict, the United States is providing $14.3 billion in aid. This support is crucial for maintaining stability in the region but also contributes to the overall expenditure of the US government.

In conclusion, October 2023 was a month filled with economic and geopolitical events that have significantly impacted the US markets. These factors have led to increased speculation about another market correction that can turn into a recession. Currently, I have positioned myself in a state of liquidity, patiently awaiting a shift toward a more bullish sentiment. This cautious approach will enable me to reposition my portfolio when the time is ripe.

The last topic I want to talk about is Supply chain innovations:

Google Cloud and Flexport partner to launch new freight platform. The new platform, called Flexport Ocean+, uses Google Cloud’s artificial intelligence (AI) and machine learning (ML) capabilities to provide real-time visibility into freight shipments and optimize routing and scheduling. The platform also offers predictive analytics to help businesses anticipate potential disruptions and make informed decisions.

Walmart partners with Drone Up to launch a drone delivery service. Walmart has partnered with Drone Up, a drone delivery company, to launch a drone delivery service for its customers in Arkansas. The service will initially be available in two towns, and Walmart plans to expand it to other locations in the future.

Amazon launches new warehouse robotics program. Amazon has launched a new program called Amazon Robotics Accelerator that provides grants and support to startups developing new robotics technologies for warehouses. The program is designed to help Amazon identify and adopt the latest robotics innovations to improve its warehouse operations.

Paperless shipping is gaining more traction in our environment. This method that allows you to electronically transmit documents to Customs, eliminating the need to print and manually attach them to shipments. This feature helps you avoid costly delays caused by handwritten, misread Customs documentation.

USPS’s new feature called ‘USPS Label Broker’. This allows customers to send outbound or return label QR codes via email or mobile app. Customers can then take the email to a USPS location where the postal workers can scan the QR code off their phone and generate a shipping label on the spot. This eliminates the need for customers to print their shipping labels at home, which is a huge relief for customers who don’t have printers. It’s a win-win situation for both businesses and the environment!

Sources

The October PMI score of 49.1 was sourced from here.
The average price of crude oil per barrel in October 2023 was $92.22, up from $84.72 in September 2023, as found here and here.
Technological advancements such as AI and Machine Learning are improving supply chain efficiency, as mentioned here, here, and here.
The average van rate fell from $2.58 per mile in September 2023 to $2.45 per mile in October 2023, as sourced from here and here.
The National Retail Federation is forecasting that holiday retail sales will be up only 2% to 3% in 2023, which is below the historical average. This information was found here, here, and here.
The tech-heavy Nasdaq Composite sank 0.5%, falling even further into correction territory in October 2023. It is now down more than 10% since its most recent high in July, as mentioned here, here, and here.
In the commercial real estate sector, the shift towards remote work during the pandemic has led to rising office vacancy rates and declining rents. The growth of e-commerce has similarly affected Retail real estate, with increasing vacancy rates and falling rents due to the decline of brick-and-mortar stores. This information was sourced from here, here, and here.