When things are moving, so is the economy. Current lending activity portends a strong trucking market, which bodes well for leveraged ETFs like the Direxion Daily Transportation Bull 3X Shares (TPOR).
The importance of the transportation sector on the overall economy can’t be understated. The book Atmospheric Change and the North American Transportation Sector details the historical significance of the sector on the broader economy.
“From a historical perspective, transportation systems have played a central role in opening up new areas for development. They have been a catalyst for economic activity, and have served as a key factor in enhancing economic productivity. Transportation investments influence where economic growth happens and how much growth occurs. Most every facet of modern society relies on transportation to some extent, and many industries, such as catalog businesses and overnight package delivery, are almost entirely built around the transportation system.”
TPOR, which is up almost 30% year-to-date, seeks daily investment results that are equal to 300 percent of the daily performance of the Dow Jones Transportation Average. The index measures the performance of large, well-known companies within the transportation industry.
Gauging Lending Activity
One way to gauge the strength of an economy is to look at lending activity in the trucking industry, which strongly implies increased transportation. It’s a sign that companies are looking to ramp up the transportation of goods, which is a positive sign for the economy.
“BMO, the former Bank of Montreal, is a leading lender to the transportation sector,” a Yahoo! Finance article said. “The company has said the bulk of the financial activity in that sector is in trucking. The data it breaks out in its quarterly earnings is considered a good barometer of the financial strength of the sector.”
“In that regard, the first quarter of 2021, which for BMO runs through Jan. 31, shows an industry that is doing well,” the article added. “The size of write-offs taken by BMO for the transportation sector fell to CA$11 million for the quarter (U.S.$ 8.7 million, at a current conversion rate of 1 Canadian dollar equaling U.S. 79 cents). That is significantly less than any recent quarterly write-off performances: CA$23 million in the fourth quarter of 2020 and CA$25 million in the first quarter of last year.”
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