Jonathan Golub, chief US equity strategist at Credit Suisse, saidOnce raw material costs rise, corporate profit margins usually rise later, benefiting most US companies and investors in US stocks.
Higher input costs are usually accompanied by extensive economic growth, so although the rise in the price of raw materials increases costs, enterprises can pass on the increased cost pressure by raising product prices. At the same time, fixed expenses such as factory equipment can also be apportioned to higher sales.
By tracking and comparing the historical trend of enterprise profit margin and commodity index (BLS industrial product price index) covered by Sp500, it is not difficult to find that the change of commodity material price can basically predict the future trend of enterprise profit margin.
Source: Wall Street Journal
Data released by the U.S. Department of Labor on April 9th showPPI (producer Price Index) in the United States rose 4.2% in March from a year earlier.Exceeded market expectations by 3.8%, surpassed the previous value by 2.8%, rising for the 11th consecutive month, andHit the highest level since 2011.
Wall Street Asset Management CEO: commodity prices still have room to rise
As countries around the world shake off the effects of the epidemic and implement a lot of fiscal stimulus to revive their economies, I think there will be room for prices of commodities and manufactured goods to go up.
In addition, due to the scarcity of some materials and clogged supply lines, purchasing managers of many companies now need to hoard large quantities of raw materials, leading to a further increase in demand for materials.
-Scott Colyer, senior Advisors Asset Management executive of the asset management company
Is it feasible to raise product prices to pass on cost pressure?
At present, many leading companies in the real estate and consumer goods industries have already begun to raise prices.
After the epidemic, the US housing market continues to be hot. Some home builders / suppliers (e.g. Sherwin-Williams Co. And door maker Masonite International Corp.), one after another with higher product prices to offset the rise in costs without losing customers.
In addition, consumer goods companies have followed suit, such as Levi Strauss & Co., Corona brewer, Constellation Brands Inc.
History shows that when input cost inflation occurs across the industry, price adjustment is more likely to be accepted by the market. And this is the environment we have today.
-David Marberger, Finance Director, Conagra