Chip Hanlon, president of Delta Global Advisors and the creator of the underlying index for the Claymore/Delta Global Shipping (SEA) said on Green Faucet that today’s activity looks a lot like the relation trade is back on. If the stimulus plans work, they could have a positive inflationary impact in the future. But is it the start of a trend? Hanlon has his doubts.
It was a big day overall for the industry, and some components of the fund were up 20% or more. This had mainly to do with the rising cost of oil today, which soared 9% to $45.38 a barrel. The majority of what shippers are transporting are manufacturing commodities, so when these items (copper, base metals) start going up, shipping tends to follow.
This is why shipping could actually show signs of recovery before the broader economy. Prior to China shipping goods, they’ll need materials to make them. Is today the start of a turnaround? It’s far too early to tell, but it’s an encouraging sign.
The Claymore/Delta Global Shipping (SEA) reacted well to the news, jumping about 11.5% in a single day. The top weightings in the fund are 61.2% industrials and 38.7% energy, while the top country is the United States at 12.5%. The Bahamas follow at 11.5% and Greece is 11.3%. Its correlation to the Baltic Dry Shipping Index is 0.61, largely because it has equity exposure.