Anyone Paying Attention To The Shippers?

1.) PANIC – There’s an old adage about smart money and dumb money. In fact, someone created a whole indicator on it. Small traders are often viewed as the “dumb money.” Not because they are dumb, but because they tend to panic sell at inflection points in markets. We might be at that juncture again. Why? Because the most speculative, small traders panicked for only the 3rd week ever. The smallest options traders spent 1/3 of their volume buying put options to open. An investor buys a put option if they expect the thing they are buying a put on to go down. In this case, they were buying puts on the S&P 500. The only other weeks we saw this behavior were at the height of the COVID washout. The old saying, "Beware of the herd at extremes," is a good one to remember.

2.) SHIPPING – You’d think that with all the war noise and the “shutdown” of the Straits of Hormuz, shipping in general would not be doing well. Eeeeehh (buzzer sound)…wrong. The Marine Transportation Index just closed at a new all-time high yesterday. Following the shipping world is helpful. When things are good, they’re busy. When things slow down, it tends to show up here first. Right now, it’s not slowing down, and the market is confirming it. Shipping and logistics also sit inside the Dow Transports, the companies responsible for moving the goods. We can see the strength from the shippers, and the Dow Transports aren’t far behind. If the companies delivering the goods are breaking out, the ones producing them (think Dow Jones Industrials) tend to follow.

3.) EARNINGS – Some have said that “earnings” are the gas in the engine of stock market growth. I would add that money supply growth is more important, but if that’s true about earnings, then this is good news for now. The S&P 500’s forward earnings continue to rise rapidly, while S&P 400 (mid-caps) and S&P 600 (small caps) forward earnings are also moving higher. The broadening breadth of forward earnings in recent months is a bullish development. We'll let the flows of capital dictate positioning, but accelerating earnings tend to be a good thing. That said, it is good to remember that at some point those accelerating earnings will start to DEcelerate. That can happen with a catalyst, like the GFC or Covid, but sometimes earnings just slow, like they did most notably in 2019. Markets front ran that deceleration, like they usually do, and dropped into the end of 2018. Could 2026 be like that? Maybe. Again, we'll let the flows dictate.