The transportation sector is regarded as a barometer for the health of the U.S. economy. The shipping industry is no exception, and the related exchange traded fund Guggenheim Shipping ETF (SEA) is used as a proxy for the Baltic Dry Index.
“The Baltic Dry Index tracks the rates of 23 global shipping routes carrying a range of commodities via different types of carriers. It measures the supply and demand for shipping capacity against the supply of dry-bulk carriers and is indirectly used as a leading indicator to gauge future production and economic growth,” Trang Ho wrote for Investor’s Business Daily.
The Baltic Dry Index has been sailing upward 26% over the past month, and is up 33% for the year, according to Bloomberg data. However, these gains are after losses that will take about four times more growth to re-gain the 2010 high. Overall, the industry has a long haul ahead to be back on course. Analysts are calling for a run-up in transportation stocks for more of 2013. The iShares Dow Jones Transportation Average (IYT) has gained 17% year-to-date, while SEA has gained 9% year-to-date, reports Trang Ho in an IBD article. The SPDR S&P 500 (SPY) has gained about 9% for the same time period. [Industrial, Transportation ETFs, Get Upgrades from S&P]
Demand is weaker for shipping services between Asia, Europe and North America, according to S&P Capital. However, the recovery in shipping stocks indicates that investors are past most of the negative news and sentiment. [ETF Chart of the Day: Shipping]
“2013 is poised to be the year of transports,” Peter Nesvold and Tavio Headley, analysts at Jefferies, wrote in a client note. “February’s solid tonnage reading would seem to disprove the argument that January’s strength was due to an easy comp from the timing of Chinese New Year. Meanwhile, our channel checks generally suggest that truckloads continue to exceed year-over-year levels and are off to a strong start so far in March.” [ETFs To Track Market Sentiment]
SEA has posted gains in 2013, but must forge ahead of the 6.75% loss in 2012 and needs to gain 68% to re-gain 2010 highs.
Guggenheim Shipping ETF
Tisha Guerrero contributed to this article.
Full disclosure: Tom Lydon’s clients own SPY.
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.
- Baltic Dry Index