FedEx’s dismal preliminary earnings and outlook sent shock waves through the market and sent shares lower during trading last Friday. The Tennessee-based shipping and logistics company announced preliminary earnings for its fiscal first quarter that missed Wall Street expectations by a landslide. It also withdrew its full-year guidance, issued just three months ago, and said it was “aggressively accelerating” cost-cutting efforts. FedEx’s warning is not the first in an increasingly tumultuous transportation sector. Air cargo traffic fell 9.7% in July from a year ago, according to data from the International Air Transport Association, the fifth consecutive month of year-on-year decline. Economic indicators like FedEx are great for gauging the underlying health of the economy. So the magnitude of the recent gains, the worst relative to expectations in 20 years, and the subsequent market reaction should not be underestimated, Chief Investment Officer, Titan Asset Management, John Leiper . , according to a Sept. 7 note from S&P Global Market Intelligence, with the research group expecting weaker trading volume ahead. And the World Trade Organization also painted a bleak picture, with an August report pointing to “stagnant growth in global trade.” Should investors be worried? According to analysts, a sharp slowdown in global freight volumes has repercussions not only for FedEx, but also for the stock market in general. “Economic indicators like FedEx are excellent at gauging the underlying health of the economy. So the magnitude of the recent gains, the worst relative to expectations in 20 years, and the subsequent backlash should not be underestimated of the market,” says John Leiper, chief investment officer. Titan Asset Management official told CNBC Pro. Hedge fund manager David Neuhauser said investors should look at shipment volume as one of several indicators of economic health. However, he stressed that the announcement of FedEx “red light” for investors. “It’s certainly a red flag. It’s one of those tea leaves that you can have when you look at the global economy. But I don’t think it’s something that reflects the trends that are forming or that a recession,” Neuhauser said. Brian Arcese, a portfolio manager at Foord Asset Management, told CNBC Pro that any weakness in FedEx air freight shipments from Asia is likely to indicate continued economic distress in China. “Our baseline forecast includes an economic slowdown driven in part by accelerating inflationary pressures and rising interest rates, which weigh on consumer discretionary spending and corporate investment, respectively,” Arcese added. “Both result in fewer freight shipments, which affects both FedEx and peers in the transportation and logistics space.” “While freight volumes can be a leading indicator of a weakening economy (and in this case they probably are, in part), it is too early to predict the extent of the decline, if any,” he said. to say. “Only time and more data points will tell.” Investors are not entirely sure which direction the global economy, inflation and growth are headed. Some days are optimistic, but there are also days when there is much more fear, and in this case, heightened by the FedEx announcement. Economist, CIMB Song Seng Wun Elsewhere, however, signs have emerged that the economy could be headed for more trouble. Both Arcese and Neuhauser pointed to profit warnings from consumer companies like Electrolux and Thule, as well as industrial companies like General Electric and Nucor that “reflect a deeper and more sustained downward trend.” What’s behind the market’s negativity While FedEx isn’t the only company marking challenges ahead, the strong market reaction that accompanied its results highlighted the market’s current fragility. CIMB economist Song Seng Wun said the sharp sell-off underlined the level of anxiety and fear in today’s volatile markets. “Investors are not entirely sure which way the global economy, inflation and growth is going. They are optimistic some days, but there are also days when there is much more fear, and in this case, heightened by the FedEx ad,” he said. said Several market observers also attribute the market anxiety to uncertainty about the current and future course of the US Federal Reserve’s monetary policy. Selena Ling, head of treasury research and strategy at OCBC Bank in Singapore, said: “The more obsessed major central banks are with combating inflationary pressures and re-anchoring inflationary expectations in the face of declining business confidence and consumers, the more uncertain the growth will be. outlook for the end of 2022 and for 2023.”
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