Is the dockers’ strike over?

Aside from the usual geopolitical headaches-especially in
the Middle East, which appears to be on
the brink of a major war, investors last week kept a close eye on the
dockers’ strike at several U.S. ports.

The problem arose over a six-year contract that was due to
expire on September 30. However, the port owners did not want to raise wages by
a maximum of 50%, while the union demanded a 77% increase.

In the end, the worst-case scenario played out. As of
October 1, a vital logistics chain in the country, which accounts for about
half of U.S. maritime imports, was paralyzed, costing the economy about $5
billion daily.

Fortunately, this did not cause an economic collapse in the
U.S., as the two sides reached an agreement on Thursday. Analysts were
concerned that recovery from a single day of downtime could take weeks.

By contrast, a more prolonged strike could have taken up to
a month and a half to resolve. So, if you’ve been stockpiling popcorn, you
might want to save it for a better time, which will undoubtedly come.

So what now?

The end of the strike is fantastic news for everyone
involved, not just the workers and the ports, but also the shipping lines and
retailers. And let’s not forget the consumers, who may have suffered shortages.

While markets, particularly the Dow Jones Index,
may not have surged dramatically on this news, they got a positive boost.

However, the agreement will only be in effect until January,
so it is a bit early to say that the underlying issue has been fully addressed.
Investors should remain attentive to the development of the discussions.

Another risk to consider is that the dockworkers’ successful
negotiation for a substantial wage increase could encourage other unions to
advocate for the rights and welfare of their members.

The timing could not be better, as the U.S. presidential
election is approaching. Naturally, it is to be expected that the ruling
party will do everything possible to secure votes.

Whether through promises or pressuring management to meet
demands, they’ll be driven to act. The downside is that this could trigger
higher wage inflation, increasing company costs.

In this context, the recent Fed decision to cut
rates by 50 basis points feels rushed. Considering these new risks, the
likelihood of similar actions in the upcoming meetings is decreasing.

Yet, the markets don’t seem concerned about this — at least
for now. They still appear bullish, as if there are no risks at all in the
economy, now or in the future…

This article was written by FL Contributors at www.forexlive.com.