FedEx earnings and bleak preliminary outlook sent shockwaves and stocks fell in Friday’s trading session. The Tennessee-based shipping and logistics company announced preliminary earnings for the first fiscal quarter that fell short of Wall Street expectations due to a landslide. It also withdrew its full-year guidance – issued just three months ago – and said it was “actively accelerating” cost-cutting efforts. The FedEx warning isn’t the first in an increasingly chaotic transportation sector. Air freight traffic fell 9.7% in July from a year ago, the fifth straight month of decline year-on-year, according to data from the International Air Transport Association. . Economy shakers like FedEx are great tools to gauge the underlying health of the economy. As a result, the magnitude of recent earnings missed – the lowest level in 20 years – and the subsequent market reaction should not be underestimated by Titan Chief Investment Officer John Leiper Asset. Management, Sea freight rates also fell as global trade volumes slowed, according to a September 7 note by S&P Global Market Intelligence, the research team expects trade volumes to be weaker in front. And the World Trade Organization painted a similarly bleak picture, with an August report indicating that “global trade growth is stagnating.” Should investors be worried? The stark drop in global freight volumes has consequences not only for FedEx but also for the broader stock market, according to analysts. John Leiper, chief investment officer: “Economic shakers like FedEx are great for gauging the underlying health of the economy. official at Titan Asset Management, told CNBC Pro. Hedge fund manager David Neuhauser said investors should consider shipping volume as one of several indicators of economic health, but he stressed that FedEx’s announcement was a “red light” for investors, Neuhauser said. : “It’s a warning sign. Brian Arcese, portfolio manager at Foord Asset Management, told CNBC Pro that any weakness in FedEx air freight shipments from Asia could let sees continued economic uncertainty in China. to consumer discretionary spending and business investment.” “Both result in less freight, which affects both FedEx and other companies in the transportation and logistics sectors.” He said: “Although freight volume can be a leading indicator of a weak economy (and in this case it could be). part), but it is still too early to predict the extent of the recession, if any,” he said. “Only time and more data points will really tell.” Investors aren’t entirely sure which direction the global economy, inflation, and growth are headed. They were upbeat on some days, but there were also days that were much more fearful, and in this case, it was enhanced by the FedEx announcement. However, the economist, CIMB Song Seng Wun elsewhere, has shown signs that the economy may be in more trouble. Both Arcese and Neuhauser point to profit warnings from consumer companies like Electrolux and Thule, as well as industrial companies like General Electric and Nucor “reflecting a deeper and more sustained downward trend.” What’s Behind the Market Negativity While FedEx isn’t the only company with challenges ahead, the responsive market response that came with its results has highlighted the current fragility on the market. CIMB economist Song Seng Wun said the sharp sell-off underscores the level of anxiety and fear in today’s volatile markets. “Investors aren’t entirely sure which direction the global economy, inflation and growth are headed. They’re bullish on some days, but there are also days that are much more fearful, and in the market. this case, magnified by the FedEx announcement,” he said. Some market watchers also attributed the market anxiety to uncertainty over the current and future course of the US Federal Reserve’s monetary policy. “The more major central banks are obsessed with fighting inflationary pressures and maintaining inflation expectations,” said Selena Ling, head of research and treasury strategy at OCBC Bank in Singapore. growth in the face of declining business and consumer confidence, the more uncertain growth is. The outlook will be towards the end of 2022 and into 2023.”
