Summary: Supply chains transmit information before markets price it. Customer performance reveals emerging demand, and supplier performance reveals capacity and execution risk. These directional spillovers move through networks in predictable ways. When customers are getting stronger, suppliers see order flow and revenue visibility improve. When suppliers are stable and delivering reliably, customers maintain margins and avoid operational bottlenecks. Both channels matter. When both directions turn positive at the same time, the effect compounds: companies benefit from improving demand and a supply base that can support it. This S&P Global Market Intelligence paper measures these directional spillovers and shows that markets systematically underreact to them. Companies with strong customer momentum, supplier momentum, or both, generate persistent and statistically significant excess returns across two decades of US equity data.

Key findings in the US market since 2005:

• Supply chain spillover is economically meaningful: Upstream momentum (customer demand transmission) and downstream momentum (supplier health transmission) generate statistically significant excess returns of 3.6% and 2.0%, respectively, in the Russell 3000.
• Bidirectional confirmation strengthens the signal: Dual momentum — positive upstream and positive downstream — produced 4.5% annual long-short returns in the Russell 3000 and 6.7% in the Russell 2000, representing 90 bps and 190 bps improvement, respectively, over upstream momentum alone.
• Supply chain spillover front-runs analyst revisions: Companies in the highest spillover tier were 7% more likely to receive upward analyst revisions than those in the lowest tier, indicating the signal captures real forward demand.