Valuations and dividends are supportive - Outlook 2024

When I look back on 2023, one of the important features that sticks in my mind is the impact on businesses of destocking within supply chains. This happened across a wide range of industries and hit some manufacturers hard. The origins of the problem go back to Covid lockdowns when some goods were hard to source.

This prompted many consumers and the supply chains servicing them to over-order goods once they were available again, and to carry higher inventory levels. As supply chains normalised, that stock build has been unwound. Essentially, in many industries, end customers found their demand satisfied from their own existing stocks or from stock held by intermediaries in the supply chains, leading to sharp decreases in demand from manufacturers. As manufacturing volumes fell, operational gearing came into play, causing sharp falls in profitability for manufacturers. These impacts are transitory, but painful nonetheless.

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The views expressed are those of the author at the date of publication unless otherwise indicated, which are subject to change, and is not investment advice.