It seems like little can go wrong for transportation exchange traded funds (ETFs) these days. Once the holiday rush is over, can this sector still be a market outperformer?
For the current momentum, you can certainly thank the holiday rush:
- The United States Postal Service is expecting a 5% increase in business this holiday season. During the four-week period since Nov. 25, 152 million parcels are expected to go out. [Transportation ETFs: The Good and the Bad.]
- Bad weather isn’t stopping anyone. Teresa Dixon Murphy for Cleveland.com reports that online shoppers are turning out in record numbers this year as bad weather keeps many residents in their homes, while retailers offer free shipping.
Shippers certainly seem to feel bullish about their future.
Lynn Adler for ABC News reports that FedEx raised its full-year forecast, thanks to rising consumer and business sentiment.
The strength is expected to continue into 2011 as retailers show a low inventory-to-sales ratio, reports Kevin Grewal for Daily Markets.
If consumer sentiment and spending continues to increase in the new year, the transportation ETFs could be a rolling train. If that happens, look for iShares Dow Jones Transportation (NYSEArca: IYT) and Guggenheim Shipping (NYSEArca: SEA) to benefit.
For full disclosure, Tom Lydon’s clients own IYT.
Tisha Guerrero contributed to this article.