As the global recovery has surged, the shipping sector and exchange traded funds (ETFs) have clipped along at a slower but steadier pace. Some say that shipping may ultimately be a more reliable indicator of a recovery.
Activity in the shipping sector can send strong, indisputable signals about the state of the global economy. What’s the message it’s sending now? The signals seem to be mixed:
- Dry Ships (Nasdaq: DRYS) reported earnings on Monday, handily beating Wall Street’s estimates. The company said that increases in spot charter rates and higher revenues from drilling rigs helped the bottom line.
- The Baltic Dry Index last year shot up to a record high before collapsing. This year, the index has recovered, while still hovering below its 10-year average. Shipping prices also have remained flat, and could become more depressed as a new influx of ships come due for construction.
- Shipping demand is generally considered to be related to commodity demand, although commodities lately have struck out on their own, reports Mark Gongloff for The Wall Street Journal. (The shipping sector changes course).
Once global demand resumes, shipping prices should recover and an increase in available ships will be moot. (What challenges are facing the shipping industry?) Monitor the trend lines as this sector finds a firm footing. As consumers begin to spend more and nations struggle to rebuild, this sector will ultimately reflect a shift in tides. Read about trend following here.
For more stories about shipping visit our shipping category.
- Claymore/Delta global Shipping (NYSEArca: SEA): up 29.7% year-to-date
- PowerShares Global Progressive Transport (NYSEArca: PTRP): up 46.9% year-to-date
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Mr. Lydon serves as an independent trustee of certain mutual funds and ETFs that are managed by Guggenheim Investments; however, any opinions or forecasts expressed herein are solely those of Mr. Lydon and not those of Guggenheim Funds, Guggenheim Investments, Guggenheim Specialized Products, LLC or any of their affiliates. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.