European markets are under pressure after French President Emmanuel Macron called for a surprise snap election following the far right's trouncing of his centrist coalition in parliamentary elections. HSBC Americas Head of Global Trade Solutions Marissa Adams breaks down the news and how it affects global markets.

Adams notes that more than 60 countries will have or have already had an election this year: "Given all the multipolarity, obviously, we can see that supply chain challenges remain regardless of which markets you're in."

She says COVID-19 was a "wake-up call" for supply chain risks. However, she notes that we're in a "new era" post-pandemic in which supply chain disruption has become the norm. The analyst explains that investors should understand whether companies are prioritizing supply chain resiliency and investing in supply chain infrastructure.

Adams reiterates that supply chains are "complex" and notes that with current inflation, "it's really important for companies to really look at their suppliers, to see how they can protect them and help them in this inflationary environment."

For more expert insight and the latest market action, click here to watch this full episode of Catalysts.

This post was written by Melanie Riehl

Video Transcript

European markets having some pressure today after French President Emmanuel Macron surprise decision to call for snap elections after his centrist coalition was trounced by the far right party.

Macron's announcement is yet another example of how global politics can have resounding impacts on both markets and the economy.

For more, we bring in Marissa Adams H BC, American head of global trade solutions, here in studio with us Marisa, thank you for being here.

We were obviously just talking about impact of this election, and what kind of stood out to me is that Macron's loss was sort of priced in.

But the snap election decision was the big surprise, and it makes me wonder if that is what's going to define this election cycle that we're seeing across the globe.

Some of these surprises that are more difficult to price in What do you think of that?

And thanks, ma.

I think one of the interesting things is that in over 60 countries this year, there will or there has been an election.

So it's a historic election year across the globe.

Uh, we've obviously seen France overnight the UK a few weeks ago, we've seen the results of Mexico, um, as well as India.

And one of the things for sure is that trade continues to be a huge topic on the campaign trail.

Now some of that's due to protectionism, nationalism, other focuses.

And one of the things that we advise our clients at HS BC is finding ways to, uh, to decouple their supply chains from geopolitical risk.

So we've recently issued a report around supply chain resiliency and Geopolitical Challenge.

So given all the multi polarity, obviously we can see that supply chain challenges remain regardless of which market you're in.

So looking at how they can find ways to derisk, uh, through through diversifying their supply chain, but also taking into account multiple scenarios.

So we're not here to predict what might happen, but help them through that.

Talk to me a little bit more because I have the report, uh, pulled up right here just in terms of what you just said at the end of the answer ways that they can derisk some of their operations, those that have been successful or those that you think are really a among the leaders in best preparing for what is a very uncertain time.

What are they doing?

So a few things and I. I think I'd actually take a step back by saying that before the COVID-19 pandemic.

Um, the singular goal of supply chain was cost, right?

So, trying to reduce costs, uh, improve the bottom line.

But the covid pandemic was really a wake up wake up call to say, Actually, you know, I have risk in my supply chain.

I don't necessarily know the second or third tier of my suppliers.

So things that companies can look at is firstly, I think taking a real big, deep dive into their supply chain.

Um, where do they see risk?

Are there certain suppliers that they have a concentration on or are there countries where potentially there's there's more risk around it?

I think one of the other things that we see is we see a trend towards proximity, um, moving supply chains and parts of that a little bit closer to home.

What that can do is obviously give you a bit more security in terms of where and how you can get your goods.

Uh, reducing costs, perhaps on the supply side and the shipping side.

But actually, sometimes that cost of production is is harder closer to home.

So there are so many things you just said I want to follow up on.

But let's start on the pandemic.

Have we completely renormalized from that in terms of supply chains, or are there still areas that are still struggling to recover?

So I would actually say that we're in a new era.

So, I, I don't think that there is a normalisation anymore.

I think that what companies are now facing is that supply chain disruption is the new norm.

We went from a world where goods were just in time.

Um, and now we're looking at people going just in case, and that's really changed.

A lot of companies balance sheets, they're having to hold more inventory.

They're having to prop up their suppliers.

And one of the things that we do at HS BC as an example is, um, providing supply chain finance off the back of sort of US buyers.

Now, some of that is to provide finance to those the suppliers, uh, where in the current inflationary environment with interest rates, they may not be the working capital themselves to absorb that cost.

Uh, but also what it tends to do is actually tighten those supplier relationships.

So if you're actually providing that supply chain finance facility, you're helping that supplier to succeed in some ways de risking your own supply chain to have that security.

Yeah, and and and as you take a look at some of the sectors that have been most affected, obviously, I think one of the sectors that come to is top of mind.

For many investors out there is what's happening right now amongst chip makers, particularly within the semiconductor industry.

What are you seeing there and then just the ultimate impact that this is going to have on these companies for investment portfolio?

What should they be keeping in mind?

Yeah, and it's a really good question.

And I think there's sort of three things that I would say that investors need to look out for when they're looking at, um, companies they're investing in.

So, number one you know, uh, are is the CFO our senior leadership talking about supply chain resiliency?

If you look at the reports, there's sort of been we've got some stats around the increases up and down around supply chain resiliency So are they focusing on both the risk and the cost?

Second thing is, they should be looking to Does the company have concentration in key markets or key sectors?

And you bring up semiconductors, which is, you know, a very common, uh, challenge at the moment where you know, a lot of the production is in Taiwan.

They are trying to move production here into the United States.

But actually that's not a snap decision.

It takes 510 years of investment.

So the third thing I'd say that they should be looking out for is that are the companies talking about investment into infrastructure, investing in their supply chains and that diversification?

And I think that's something for them to take a look at as they're looking at companies they're investing in.

Well, that makes me think about the China of it all.

And I'm curious what you're telling investors about the potential China risks.

Whenever we have CEO S come in who are working here in the US and also globally.

I love to ask them how they kind of walk the tight rope of dealing with the US and China amid this increased tariff war.

What What are you telling clients about that?

Look, I, I think the thing that we we sort of say to clients is that supply chains are complex.

And, um, even when things are produced here in the United States, there's a number of different, um, components that are produced in Asia, in Europe and other markets in the world.

So what we're trying to talk to our customers about is one take looking at the risks holistically.

So don't just look at one category of your products, but do you have a geopolitical risk in one country versus another?

Is there a risk from a, uh, transport, uh, aspect in another country?

So we tell them to look holistically at the risks rather than focus on a country by country basis.

What about inflationary pressures?

Is this going to worsen the situation?

Is this going to prolong some of the challenges that we're seeing around the world?

It's definitely, uh, prolonged some of it from a supply chain perspective and I. I go back to the fact that, uh, if you're a large corporate, you can typically get 5 to 10% more on your facility, but actually suppliers in some of these local markets.

If the cost of inputs goes up 5 to 10% they might not not actually have that financing to to supply that.

So that's why it's really important for companies to really look at their suppliers to see how they can protect them and help them in this inflationary environment.

Thank you so much for joining us.

Thanks so much.

Great conversation.

Really appreciate it again.

That was Marissa Adams HS BC, America's head of global trade solutions.