The iShares Transportation Average ETF (NYSEArca: IYT), which tracks the Dow Jones Transportation Average, is down 7% year-to-date, but the bulk of those losses were confined to early January as the largest transportation exchange traded fund has steadied in recent weeks to post a 1% one-month gain.
According to the U.S. Bureau of Transportation, the volume of freight transported by road, rail, air, barge and pipelines has been flattening or lower since the end of 2014, Reuters reports. Meanwhile, stubbornly low energy prices may help the transportation industry cut down on costs.
Transportation stocks were expected to benefit from lower oil prices and while that has been the case for airline stocks, other industry groups represented in IYT, including railroads, have struggled. Railroad operators, which are nearly 22% of IYT’s weight, making that the ETF’s third-largest industry allocation, are giving investors cause for concern with transportation stocks.
Stymied by tumbling shares of railroad operators and airlines that have surprisingly fallen in unison with oil prices, transportation exchange traded funds have recently been disappointments. [Transportation ETFs Need Help]
Last year, the railway industry weakened on lower rail traffic after the drop in energy prices, notably from oil and coal companies. Over the first 35 weeks 2015, U.S. railroads experienced cumulative volume that was down more than 4% year-over-year. However, the pressures may have already been priced in, and the industry has a number of factors that will help support further growth.
Investors also need to be mindful of IYT’s technical situation.