Business Checkpoint: Looking into the logistics
The desk argues that while third-quarter profitability growth suggests resilience among small and mid-sized businesses, ongoing logistics costs and supply chain pressures remain significant hurdles. Per the full note by Bank of America, although nearly half of tariff payments were refunded by September, the growth in profitability may be stymied as the share of refunds relative to revenue peaks. This context suggests caution in market positioning, particularly against the backdrop of global economic uncertainties.
What the desk is arguing
The desk highlights that while the financial health of small and mid-sized businesses improved in Q3, ongoing challenges from supply chain disruptions and logistics costs could dampen longer-term growth prospects. Per the full note from Bank of America, profitability growth was indeed positive, but the pressures from the logistics sector complicate the overall narrative of economic recovery.
Significantly, the data indicates that almost 50% of estimated tariff payments had been refunded by September, but the refunds are now peaking when assessed as a share of revenue. This trend underscores the complexity of the current economic landscape and serves as a reminder of potential vulnerabilities in the profitability growth narrative.
Where it sits in our coverage
Our current consensus target for the relevant currency pair stands at 1.075, with a range between 1.04 and 1.12. For context, notable firm targets include: - jpmorgan: 1.10 (Mar26) - bofa: 1.04 (Mar26)
This positioning aligns closely with jpmorgan and indicates a moderately optimistic view compared to bofa, whose stance reflects a more cautious outlook. The desk's positioning is closer to the upper bound of the consensus, reflecting a broader expectation of resilience despite certain pressures.
How other firms see it
Expectations among firms seem to split, with jpmorgan aligning with a growth narrative that sees potential upside amidst current challenges. Conversely, bofa projects a more tempered view, indicating the possibility of headwinds affecting growth.
Key indicators to watch include logistics costs and global supply chain metrics, particularly as they relate to overall economic sentiment and trade-related decisions, which could shift the dynamics in currency movements.
How firms align with this view
Aligned with the desk view
Contrary positioning
Key takeaways
- 01Q3 profitability growth among businesses shows resilience, but logistics challenges persist.
- 02Nearly half of tariff refunds are issued, but growth in refunds is plateauing relative to revenue.
- 03Our target for the relevant currency pair is set at 1.075, aligning closely with expectations for business performance.
- 04The division in sentiment among firms highlights contrasting views on future growth potential.
Market implications
Investors should closely monitor logistics costs and tariff developments as they could influence currency valuations. Watch for price action around the 1.075 level, as a sustained move above or below may indicate market sentiment shifts.
Risks to this view
A significant rise in logistics costs or unforeseen supply chain disruptions could derail the current growth narrative and negatively impact profitability, forcing a reevaluation of existing market positions.
~~~~~~~~~~~~~~~ Bank of America ~~~~~~~~~~~~~~~ Business Checkpoint: Looking into the logistics Profitability growth was positive in the third quarter, but logistics costs and supply chain pressures are creating challenges. Small and mid-sized businesses entered Q3 in relatively solid financial condition, with profitability growth up across both groups, according to Bank of America business account data. Nearly half of estimated tariff payments had been refunded by September, though the share of these refunds relative to revenue has peaked.
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