Daily Brief: All This Chaos In Egypt Could Be A Problem For Your Stocks And Wallet Alike

Daily Brief: All This Chaos In Egypt Could Be A Problem For Your Stocks And Wallet Alike

almost 3 years ago3 mins

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The Suez Canal has been blocked for a few days now, in what has to be the world’s most mortifying three-point turn.

What does this mean?

The Suez Canal – which runs through Egypt and connects the Mediterranean Sea to the Red Sea – is seriously important, with some $10 billion worth of trade passing through every day. Or rather, that’s what should be happening: nothing’s been able to get through since a 400 meter-long, 200,000-tonne container ship got stuck during a storm on Tuesday. That’s left 237 ships – and counting – waiting on either side.

Suez Canal blocked
The ship Ever Given blocking the Suez Canal

A short-term disruption was unlikely to have much of an impact, but investors started to pay more attention after reports on Thursday suggested it could take weeks to resolve the blockage. And when you consider that economically vital commodities – crops, livestock, oil, fuel, chemicals, and much more – are aboard some of these ships, you start to understand why…

The queue of ships at the Suez Canal is growing
Source: Bloomberg

Why should I care?

For markets: The blockage might hurt stock markets.

Consumer products and the components used to make them are stuck on the canal too, and the longer they’re held up, the more companies’ profits – and in all likelihood stock prices – will suffer. If that “supply-side” panic sounds familiar, it might be because it was all investors were talking about this time last year, when the pandemic first brought global trade to its knees.

For you personally: The blockage might hurt your bank balance.

If this brouhaha drags on, one outcome’s almost guaranteed: higher inflation. That’s because a shortage of in-demand commodities and products will push up prices of those that are available. Any concerns about inflation could encourage investors to sell stocks again, sure, but it could also come back on you in a more noticeable way: you’ll have to pay more for products, leaving you with less cash to spend elsewhere.

Keep reading for our next story...

Philips Is Selling Its Domestic Appliances Segment

Philips image

Philips agreed to sell its domestic appliances business on Thursday, as it looks to make a fresh-faced start with conglomerate skeptics.

What does this mean?

Philips became a household name for its shavers, lightbulbs, and televisions, but that reputation has been on the way out: the company sold off its lighting business back in 2016, and it’s been cutting back on its other divisions ever since. These days, it’s more interested in making healthcare technology, like in-demand respiratory machines and remote medical care equipment. And on Thursday, the company announced the final nail in the coffin of its former self: it’s selling its kitchen, coffee, and home care appliances business to a Chinese private equity firm.

Why should I care?

For markets: The sum isn’t greater than its parts.

Conglomerates are big companies that operate several entirely unrelated businesses. But despite the slanderous rumors you might hear, bigger isn’t always better. See, investors aren’t convinced that conglomerates can manage various offshoots better than they can a “pure-play” business. That means a multifaceted company isn’t always as valuable as the sum of its parts, and investors essentially get what’s known as a “conglomerate discount”. But Philips looks like it’s had some luck reducing that discount so far: the company is more profitable since it sold off its lighting business, and its shares have doubled too.

Philips stock
Source: Google Finance

Zooming out: The telehealth industry might be worth a look.

Less of a focus on consumer products should free up Philips’ time to concentrate on healthcare technology – specifically, on remote medical care equipment. That market saw a sharp acceleration in growth during the pandemic, with the number of US patients using telehealth services going from 11% in 2019 to 46% by the middle of 2020. Consulting firm McKinsey even reckons the industry’s pre-pandemic revenue of $3 billion has the potential to grow to as much as $250 billion.

Use of telehealth service
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