It’s good to see that the US economy continues to be an important source of strength for the global economy. Over the past few years, there has been a close correlation between the CRB raw industrials spot price index and the S&P 500 Transportation Index. Since the summer of 2012, the former has been relatively flat, while the latter has gone on to make numerous new record highs during 2013.
I view the commodity index as a sensitive indicator of global economic growth that has been especially sensitive to the pace of growth in China. The Transportation Index tends to be a more US-centric economic indicator. Its bullishness is confirmed by railcar loadings. Total loadings rose to a cyclical high in early November. Intermodal loadings rose to a record high. The ATA Trucking Index also rose to a new record high in September.
Not surprisingly, the forward earnings of the S&P 500 Transportation Index rose to a new record high in mid-November. The same can be said for the forward earnings of the S&P 500 Railroads industry, which accounts for 45% of the market cap of the Transportation Index. The fact that forward earnings is also at a record high for S&P 500 Air Freight & Logistics suggests that the global economy is not as weak as suggested by the flat trend in global exports. Of course, the recent weakness in oil prices is also a bullish development for transportation stocks.
Today's Morning Briefing: Bubble Balderdash. (1) Financial press is bubbling about bubbles. (2) Yellen doesn’t see any. (3) Summers says we need them. (4) Krugman agrees and wants negative deposit rates. (5) A bubble in Keynesians and their flawed models. (6) Summers says beware of Asiaphoria because slowdowns happen. (7) Another big bang in China? (8) Five-step reform program. (9) China MSCI is cheap. (10) Focus on overweight-rated S&P 500 Transportation stocks. (More for subscribers.)
I view the commodity index as a sensitive indicator of global economic growth that has been especially sensitive to the pace of growth in China. The Transportation Index tends to be a more US-centric economic indicator. Its bullishness is confirmed by railcar loadings. Total loadings rose to a cyclical high in early November. Intermodal loadings rose to a record high. The ATA Trucking Index also rose to a new record high in September.
Not surprisingly, the forward earnings of the S&P 500 Transportation Index rose to a new record high in mid-November. The same can be said for the forward earnings of the S&P 500 Railroads industry, which accounts for 45% of the market cap of the Transportation Index. The fact that forward earnings is also at a record high for S&P 500 Air Freight & Logistics suggests that the global economy is not as weak as suggested by the flat trend in global exports. Of course, the recent weakness in oil prices is also a bullish development for transportation stocks.
Today's Morning Briefing: Bubble Balderdash. (1) Financial press is bubbling about bubbles. (2) Yellen doesn’t see any. (3) Summers says we need them. (4) Krugman agrees and wants negative deposit rates. (5) A bubble in Keynesians and their flawed models. (6) Summers says beware of Asiaphoria because slowdowns happen. (7) Another big bang in China? (8) Five-step reform program. (9) China MSCI is cheap. (10) Focus on overweight-rated S&P 500 Transportation stocks. (More for subscribers.)
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