(Bloomberg) \u2014 The once-sleepy companies that move goods \u2014 and people \u2014 through America\u2019s roads, rails, skies and water are mobilizing in a rapid rally.<\/p>\n
After years of lagging the major US equities benchmarks, the Dow Jones Transportation Average (^DJT) is in the lead, outperforming the S&P 500 Index (^GSPC) by 13 percentage points in the past month and a half, near the most since the financial crisis. The gauge \u2014 which contains industry stalwarts such as CSX Corp. (CSX), FedEx Corp. (FDX) and Old Dominion Freight Line Inc. (ODFL), and even United Airlines Holdings Inc. (UAL) \u2014 has been catapulted higher by strong data and a pivot away from the big tech winners of the last few years.<\/p>\n
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The urge to diversify in the stock market is boosting the appeal of the \u201cold economy.\u201d Worries over disruption from artificial intelligence, as well as the hyperscalers\u2019 massive capital spending plans for the technology, have led investors to yank money out of the sector and put it elsewhere. Manufacturing data further bolstered the case, providing an optimistic signal for those who seek safer investments.<\/p>\n
Following last week\u2019s readout from the Institute for Supply Management which showed manufacturing activity expanded at the fastest pace since 2022 in January, the transportation gauge notched another all-time closing high. The gauge inched higher on Wednesday after a stronger-than-expected jobs report signaled the labor market is finding its footing.<\/p>\n \u201cThe sector is one of the most economically sensitive, as higher activity levels correspond with items needing to move around both the country (and the world),\u201d said Sameer Samana, head of global equities and real assets at Wells Fargo Investment Institute. Investors looking for alternatives to AI-tied stocks paired with a strong economy \u201cfurther bolster the positive investment thesis.\u201d<\/p>\n Transportation forms part of the \u201cAI resistant\u201d trade, with investors increasingly looking to pick up companies whose main functions cannot be replicated by the technology.<\/p>\n Recent data has further aided transportation stocks in several ways, Mark Hackett, chief market strategist at Nationwide, explained.<\/p>\n \u201cThe direct is obviously if there\u2019s increased demand for manufacturing, that definitionally would increase the need for transportation,\u201d he said. It also suggests the broader economy is improving and is a key technical signal for investors to move into stocks that are the first to benefit from an economic improvement.<\/p>\n<\/p><\/div>\n Still, there are some who warn that future gains could be more limited, at least for some of the group. Citigroup Inc. analyst Ariel Rosa downgraded the recommendation on four truckers, including Old Dominion, after the ISM data. An improvement in their economic backdrop was \u201clargely priced in\u201d to shares, Rosa wrote to clients.<\/p>\n Leuthold Group\u2019s Greg Swenson called airlines, railroads and cargo a \u201cmixed bag,\u201d last week. He was more sanguine on the outlook for air freight and logistics.<\/p>\n While Christopher Kuhn, a Benchmark analyst covering trucking stocks, noted that the ISM gauge has only been in expansion for a month, if demand picks up for truckers, the companies will be quick to benefit. He thinks the rally in the trucking sector has room to run.<\/p>\n \u201cYou just get a little bit of revenue growth, a little bit of volume growth and a little bit of pricing growth and you could see some pretty big incremental margins drop to the bottom line,\u201d Kuhn said.<\/p>\n Most Read from Bloomberg Businessweek<\/p>\n \u00a92026 Bloomberg L.P.<\/p>\n<\/p><\/div>\n<\/div>\n<\/div>\n<\/figure>\n
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