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The economy might be slowing down from its peak, and there’s no better evidence for it than in the transportation sector.
Last week’s release of the February jobs report disappointed in a big way. With a mere 20,000 increase in total nonfarm payrolls, it was much lower than the consensus expectation for 181,000 new jobs. After a long string of jobs successes, this report made investors nervous that economic growth was truly slowing down.
However, for those who paid attention, one critical sector was already slowing down and foreshadowed recent numbers. Friday’s report simply proved that it wasn’t just a fluke.
The transportation sector is a favorite Wall Street bellwether for the economy – and the stock market by extension. It’s also been one of the weakest sectors in the stock market this year.
The forecasting ability of transportation stocks, such as air freight, rails, tankers, and trucking, is no secret. After all, chartists have been following “Dow theory,” named after The Wall Street Journal co-founder Charles Dow, for decades. They look for moves in the Dow Jones Industrial Average to be echoed in the Dow Transports. The theory holds that if the companies that make things and the companies that deliver those things are both doing well, then the economy should be doing well, too.
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Unfortunately for the bulls, the late 2018 market sell-off