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Mark Hulbert: This high-flying index is signaling that the stock market and the U.S. economy are just fine

Stock marketplace bulls were given some surprising just right news on Thursday.

It wasn’t that the Nasdaq Composite Index COMP, +0.03%  is at a document level.

It’s that the Freight Transportation Services Index hit a brand new high.

Freight Transportation Services? Few traders take note of the data-release time table for this index, a lot much less even learn about it. But its standing as a leading economic indicator rests on a robust statistical foundation.

The Freight Transportation Services Index measures the quantity of the movement of freight by U.S. transportation companies. It is calculated by the Bureau of Transportation Statistics within the U.S. Department of Transportation. The index is up to date per month, and the latest figure, reflecting data for May 2018, was once released Thursday morning; the index registered its third new high prior to now 4 months, and is up 6.four percent% over the trailing 12 months.

Downward trend adjustments within the Freight Transportation Services index have, no less than over the past three decades, led economic slowdowns.

Why does this topic? According to analyze conducted by the Bureau, downward trend adjustments within the Freight Transportation Services Index have, no less than over the past three decades, led economic slowdowns by a mean of 4 to five months. That won't appear to be a protracted lead time, but keep in mind that it’s uncommon to find indexes that are reliable coincident signs, a lot much less leading ones.

Read: The inventory marketplace’s subsequent step may just tip the steadiness toward bears — or bulls

The accompanying chart additionally plots a companion index that displays passenger transportation within the U.S., in addition to a mixed index which displays each the freight and passenger versions. Even regardless that these other indices don’t boast relatively as just right a track document as a leading economic indicator as the freight version, their document is decent. And, as the chart shows, each and every of those other two measures is also at an all-time high.

It stands to explanation why that the freight transportation sector would be a leading indicator, after all. If the economy is about to grow extra slowly, or turn down, be expecting freight companies to be among the first to exhibit weak point.

That the sphere is not showing any early-warning indicators of such weak point is particularly important at this time, given fashionable worries about an impending trade battle with China and other main U.S. buying and selling partners. The freight transportation sector will also be considered a “canary within the coal mine” on the subject of the chance of one of these trade battle, and so far the canary seems to be doing simply wonderful.

To make certain, the latest Freight Transportation Services Index studying doesn’t amount to a make sure that the U.S. economy on the whole, or the inventory marketplace specifically, is on cast floor for the foreseeable long term. Perhaps one of the best ways to take into consideration it is by asking a rhetorical question: If the economy and inventory marketplace are about to move over a cliff, why hasn’t this shown up among freight-transportation companies’ prospects?

For more information, together with descriptions of the Hulbert Sentiment Indices, pass to The Hulbert Financial Digest or email [email protected] . Create an email alert for Mark Hulbert’s MarketWatch columns right here (requires sign-in).

 

Mark Hulbert has been monitoring the recommendation of greater than 160 monetary newsletters since 1980.

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