The bull is back on steroids, especially for transportation stocks. The S&P 500 Transportation stock price index is up 9.9% ytd to a new record high, outpacing the 4.1% increase in the S&P 500. Flying high and barreling along are Airlines (43.5%), Trucking (17.6), and Railroads (10.5). Lagging behind is Air Freight & Logistics (-0.2). This suggests that the US economy is growing at a solid pace, while the global economy is doing so more slowly.
The strength of the S&P 500 Transportation index also confirms my secular bull market thesis. This index is now 66% above its previous record high on June 5, 2008. As I noted last week, the S&P 500 is 23% above its previous record high on October 9, 2007. This is a bullish development according to Dow Theory, which posits that as the DJIT goes, so go the economy and the DJIA. The former is up 9.5% ytd, while the latter is up 0.8%.
Industry analysts recently have been raising their 2014 and 2015 earnings estimates for the S&P 500 Transportation Composite. Its forward earnings rose to a record high last week, up 16.4% y/y. Its forward P/E is up to 16.3 from a recent low of 12.0 during September 29, 2011. That’s not frothy, but it isn’t cheap either. In any event, the fundamentals remain bullish.
Today's Morning Briefing: Chugging Along. (1) Transportation stocks on steroids. (2) Confirming secular bull thesis. (3) High correlation between business inventories and transportation indicators. (4) Shipping oil by rail is a big business. (5) Another record high for the S&P 500 profit margin. (6) It has been different this time for margins, so far. (7) Industry analysts remain upbeat on margins. (8) Core inflation rebounding in US. (9) Abenomics delivers higher inflation and unintended consequences. (10) ECB struggling to do whatever it takes. (11) “Ida” (+ + +).
