Article Image

IPFS News Link • Economy - Economics USA

Whither the Market in an Era of Rate Hikes?

• http://www.thedailybell.com

The US Economy: Still on Track? ... Raw materials and goods need to be transported regardless of how modern or sophisticated an economy is. Every week the Association of American Railways ("AAR") posts a free report on rail volumes transported across North America by major category. This provides some decent clues on the condition of the US economy, almost in real time ... The latest reports show a cluster of negative readings (red circle) which is a novelty in this cycle (by count, not magnitude). – Erico Matias Tavares/Linked In

Dominant Social Theme: Things are getting better and better.

Free-Market Analysis: The Baltic Dry Index has received a lot of coverage because it tracks shipping activity worldwide – and it has never been lower. Nobody is shipping much of anything, it seems.

For this reason, Tavares's analysis of US rail transportation may have received more attention than it would have otherwise. It was posted at ZeroHedge, for instance, and reposted at other websites as well.

He concluded that rail transport volumes were showing considerable weakness (see excerpt above). However, the weakness was relatively recent so he declines to draw any firm conclusions.

More:

The rail intermodal traffic category registers the long-haul movement of shipping containers and truck trailers by rail whenever combined with (a much shorter) truck movement at one or both ends ... The weaknesses leading up to the 2008 financial crisis is pretty noticeable ...

The analysis covers commodity groups within the context of rail traffic. According to the article, rail shipping shows a continued glut of oil and gas. Forest products, a good indicator of construction, have also fallen off significantly. However, motor vehicle shipping has been setting a new high.

His conclusion:

Our analysis of rail volumes provides a mixed picture of the US economy at this point: oil & gas and mining-related sectors are taking a real beating, some consumer sectors seem to be holding up and there are signs of weakness in the housing sector. 2016 should witness some type of a resolution here.

Tavares, as we can see, declines to make any firm predictions. However, over at the CFA Institute, Ron Rimkus writes that "2016 is a turning point for markets," and that while the world's outlook is grim, the US may benefit considerably from Federal Reserve rate hikes.

The Fed ... signaled four .25% increases in interest rates are in store for 2016 ... Although the Fed has proceeded ever so gingerly, the world is nevertheless at a turning point punctuated by the Fed's historic rate hike.


www.universityofreason.com/a/29887/KWADzukm