Shares rebounded on Wednesday as Fed Chairman Jerome Powell announced a likely interest rate cut later this month. The S & P 500
SPX, + 0.45%
COMP + 0.75%
both broke into record territory, while the Dow Jones Industrial Average
DJIA, + 0.29%
broke a series of three days of defeat.
But action alone could throw cold water on the recent strength of the market, warns London-based strategist Bill Blain of Shard Capital, which manages more than $ 1 billion in assets.
"I am concerned that the market underestimates how much Boeing could do silly things," he warned Wednesday in his morning note. "When that happens, the entire stock market will be shaken aggressively, causing suffering on all actions."
stock, the largest component of the Dow, closed the session slightly down and revolves around its beginning of the year. Shares are down about 7% since the second crash of the 737 Max on March 10th.
"It's quite stable for a company that could have serious problems because of a host of demand issues (ie, not selling a lot of planes), regulation, legality (many people suing), cash, a loss of self-confidence and a growing perception. the company has lost sight of security in search of profit, "explained Blain.
He tackled Boeing's specific problems to paint a gloomy picture, not only for the title, but for the rest of the market.
"The likely trigger of a market shock will be a" no-see-em "."
First, he says, it is unlikely that the 737 Max, which accumulates its stocks in the car parks of the airport, come alive this year. "Boeing has cash to build a plane that nobody can fly – it's not a great strategy," Blain wrote.
So the company is trying to bring in other planes to compensate.
This, however, has presented its own problems, including problems with 787 Dreamliners, what the New York Times
reported suffer from "poor quality production and low monitoring" at Charleston's Boeing plant.
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Another problem is the approach taken by the builder to upgrade his old aircraft instead of designing new ones.
"It made sense for Boeing to continue modernizing and developing the Blain said, "Because the factories were still performing well and they could tell the regulators that it was only an upgrade and not a new design. saving billions of dollars in testing and training. "
But this led to a cost reduction that compromised the 737 Max.
"Boeing must accept the day they did not leave with a brand new design – which would have been extremely expensive and would have negatively impacted market performance in recent years – but would have let Boeing dominate the big airspace and reap the kind of returns that he could have had. done on the Dreamliner, "he wrote.
So, what does all this mean for investors?
"The likely trigger of a market shock will be a" no-see-em, "predicted Blain." Something so obviously hidden from view, it catches us completely and painfully by the shorts and curlies. "
And this trigger, he says, could be Boeing.