I'm all for collective barging, but as a trader I try to keep my finger on the pulse of news that could impact markets. As you may have already heard, tens of thousands of dockworkers are set to strike as soon as Oct. 1. If that happen it could potentially cripple dozens of ports along the East and Gulf coasts with major implications for the U.S. economy.
It's pretty wild to think about it, but a shutdown of the ports would cost the economy up to $4.5 billion each day. The East and Gulf Coast ports account for more than half of U.S. container imports, facilitating the transport of everything from fresh fruit to electronics. A strike lasting only a handful of days would wreak little damage, but a prolonged work stoppage of several weeks or months could drive up prices for some goods and cause layoffs at manufacturers as raw materials dry up.
As I said in the start of this article, I think a short term strike is worth it. However, an extended strike would be bad. My estimates say the supply chain will start to get shocked after a couple of weeks and if it gets beyond that, we’ll start to see some much more signifiant implications. As for the trade I think if we see a strike markets will over correct so there's opportunity to make a quick trade on the news. The market already feels a bit topsy so this may be a catalyst for a downward move.
My theory is further bolster by the fact that trade organizations sent a letter to Biden earlier this month urging the White House to intervene in a strike. The President has the power to prevent or halt a strike under the 1947 Taft-Hartley Act. The White House has not been saying much, but they did release a statement saying they don't intend to intervene but is “monitoring and assessing” ways to address the potential impact of a strike for the nation’s supply chain. The Fed will also be assessing the situation as potential price increases may nudge the Fed to hold off on interest rate cuts which were expected in the coming months.
If you are looking to trade individual companies. I think focusing on food products we are especially vulnerable to an uptick in prices could be interesting. As much as 75% of the nation’s imported bananas come through ports on the East and Gulf Coasts, threatening the supply of a highly perishable product. My point is I think we are going to see some volatility in markets which should open up some good trading opportunities.