Those who are banking on the global economic recovery are closely eying shipping and transportation-related exchange traded funds (ETFs), but the two sectors could see very different performance through the holiday season.
UPS (NYSE: UPS) could help drive the transportation ETF. The world’s largest shipper is on target for a holiday shipping spike this year. At its peak, this season is expected to be busier than the last, the company said the 24 million shipments will be about 60% more than the 15.1 million the company ships on a normal day, according to Dow Jones Newswire on The Wall Street Journal. The busiest day is expected to be Dec. 22. [Transportation ETFs: The Good and the Bad.]
FedEx (NYSE: FDX) also has a bullish outlook for the holidays, forecasting an 11% increase in shipping between Thanksgiving and Christmas. It also expects to make history on Dec. 13 – the shipper predicts that it will ship 16 million packages around the world on that day, making it the busiest ever, reports The Orlando Business Journal.
Look for a potential holiday season pop in iShares Dow Jones Transportation (NYSEArca: IYT). UPS is 7.7% of the ETF; FedEx is 10%.
The broader shipping sector is feeling a bit of a pinch.
People’s Daily Online reports that although the global shipping is rising, shipping by water is facing down some volatility, weighed down by over-capacity. [4 Bullish Signals for Transportation ETFs.]
JeeYon Park for CNBC reports that the Baltic Dry Shipping Index, a leading economic indicator used by market insiders to gauge global demand for dry commodities has been on the decline in the last two weeks.
Both situations could negatively impact Guggenheim Shipping (NYSEArca: SEA), at least in the short-term. Though SEA doesn’t track the Baltic Dry Index, it has a 0.61 correlation.
For full disclosure, Tom Lydon’s clients own shares of IYT.
Tisha Guerrero contributed to this article.