Weekly Financial Market Analysis: 21/10/2024 (McDonald’s E. coli outbreak and Global Public debt)
Weekly Financial Market Analysis: 21/10/2024 (McDonald’s E. coli outbreak and Global Public debt)
Writer: Klinsmann Lee
Investigation continues with McDonald's food contamination outbreak in the United States. [1]
Background:
McDonald in the United States faces a food contamination outbreak with 75 cases reported since late September 2024.
The likely contaminant is the slivered onions used in the Quarter Pounder. California-based vegetable producer Taylor Farms is the supplier of onions it removed from its supply chain.
E. coli can spread through contaminated food or water or individuals contacting an infected person.
Klinsmann’s Analysis:
Food Contamination outbreak seriously damages the reputation of the food brand. Referencing previous food outbreaks by other companies in the article:
Wendy’s experienced a similar E. coli food outbreak in 2022 – no serious impact on long-term sales.
Jack in the Box experienced a food safety issue in 1992 – This led to a steep decline in sales in the following few years and seriously affected the company’s reputation.
Chipotle experienced an initial food contamination outbreak in 2015 – it took a few years and a new CEO to rebuild trust for consumers in its food product.
The factors to consider for McDonald's are how widespread the contamination will continue to be and how extent media coverage of the CBC investigation.
Actions that have been taken or could be taken by McDonald's in this situation include:
Safety Assurance – The company has already released a statement outlining the steps it has taken to contain the outbreak.
Communication – The company should continue to communicate to consumers and shareholders that it takes safety seriously.
Actions – Taking proactive actions such as increasing the number of sanitation procedures and protocols and further testing of their ingredients.
Overall, I believe this outbreak will not have a significant impact on McDonald given the company’s brand value and recognition. The number of infected cases reported are also small at the moment.
Global Public Debt will rise to $100 trillion by year-end. [2]
Background:
According to IMF’s forecast, global public debt will continue to rise above $100 trillion by year-end.
China and the United States account for a significant share of rising public debt.
Countries often face a dilemma where they need to continue to spend to ensure growth and security while resisting raising higher taxation to offset the spending.
Klinsmann’s Analysis:
Public debt level will continue to rise in the future as countries continue to utilise debt funding to cover their deficit.
This should not be an issue as long as the lenders continue to remain optimistic and trustworthy in the country’s fiscal health and economic growth.
Yet, when this trust is broken, this will often lead to a market panic that create rapid selloff in assets, reduced economic activities and higher borrower costs for the country.
Sometimes it is scary to see that the global economy is funded by all these debts with no limit or action set in place to reduce it.
References:
[2] https://www.cnbc.com/2024/10/23/global-public-debt-will-hit-100-trillion-by-year-end-says-imf.html
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