The transportation industry can give an indication of how strong the economy is, and right now, a correction is underway amid rising inflation, but ACT Research says that the industry is far from hurting.
“To be fair, for the first time since Q2’20 transportation metrics stopped moving ‘up and to the right’ in Q1,” said ACT president and senior analyst Kenny Vieth in The Trucker.
“While a mid-2022 deceleration in freight activity and rates has long been anticipated in ACT’s freight market research and the timing of the turn was as anticipated, the magnitude of the correction was considerably larger than expected," Vieth added.
However, it’s not all doom and gloom for the transportation industry. Even with the threat of inflation providing headwinds for the sector, that shouldn’t unsettle the industry’s trajectory in the next year or so.
“Recognizing the uptick in caution flags, there is still much to like about the current situation," Vieth continued. "As a result, our forecasts for 2022 and 2023 are virtually unchanged: Carrier profitability, pent-up demand and prebuying remain large forces that should propel the industry into the end of 2023. And, while the risk of stagflation has grown, part of the ‘-flation’ are hot U.S. and Canadian job markets. As well, consumer debt service as a percentage of disposable income is near trough levels and corporate profits are at all-time highs, so there is greater capacity economy-wide to absorb shocks.”
Traders looking to capitalize on a move to the upside for the transportation industry can look to leveraged ETFs such as the Direxion Daily Transportation Bull 3X Shares (TPOR).
The fund seeks daily investment results that are equal to 300% of the daily performance of the Dow Jones Transportation Average. The index measures the performance of large, well-known companies within the transportation industry.
An Evolving Transportation Industry
The increased use of artificial intelligence in the transportation sector will continue to move the industry forward, literally. That said, another potential trader is the Direxion Daily Robotics, Artificial Intelligence & Automation Index Bull 2X ETF (UBOT).
UBOT seeks daily investment results equal to 200% of the daily performance of the Indxx Global Robotics and Artificial Intelligence Thematic Index, which is designed to provide exposure to exchange-listed companies in developed markets that are expected to benefit from the adoption and utilization of robotics and/or artificial intelligence.
For more news, information, and strategy, visit the Leveraged & Inverse Channel.