Are The Transports In Trouble?
1.) AI – What if we’re closer to the beginning than the end? Yes a pile has already been spent on the AI buildout. More than $1 Trillion in fact. Mind boggling. But major technological revolutions need somebody to build the stuff first. And that costs money. Think of the history of the railroads. During the railroad boom of the 1860s and early 1870s, roughly $2.5 billion was spent building American railroads. Back then about 25% of US GDP. Then we have the internet. From 1995 through 2002, worldwide investment in telecommunications infrastructure totaled roughly $1.5 trillion. Remember, this was 25 years ago, and again about 25% of US GDP at the time. The entire world economy was much smaller than it is today. We tend to think of AI as just software stuff. But building it requires an incredible amount of physical stuff. I’ve written before about the “Rule of 25”. During several of these giant buildouts, the amount eventually spent reached the equivalent of roughly 25% of annual U.S. GDP. If that holds true again, we’re headed toward $8 Trillion of AI spending…and we’re no where near that yet.
2.) TRANSPORTS – Where’s the pain today? At the gas pump…and other energy needs! So far in 2026, heating oil is leading the charge, up a massive 138% year to date. Meanwhile, gasoline is up 101%, while WTI crude oil is up 78%. There are plenty of reasons for the move, but the main point is simple: Supply risk is elevated, geopolitical conflict remains a major tailwind, and refined product markets are extremely tight. Heating oil and gasoline are outperforming crude, which tells us the real pressure is showing up in refined products. And that matters because consumers don’t fill their tanks with crude oil, Truckers don’t run their rigs on crude oil, and Airlines don’t fly planes with crude oil. Refined oil is where the pain is. And that matters for transports. Trucking is one of the most important industries in America, even though most people only notice it when something breaks. When diesel prices explode, trucking companies get squeezed hard. They can pass some of those costs along through fuel surcharges, but that doesn’t make the pain disappear, especially when demand softens or customers push back. If we look at an equal-weight basket of trucking companies, we can see the market telling us something. It’s telling us that these higher energy prices are eating into margins, pressuring transportation companies, and creating real stress in an important part of the economy. So truckers and airlines might be some of the losers in the market, while the refiners could be the winners…especially if we think about refining the oil out of Venezuela. Is this enough to “break” the market? No…not likely. Just an element we’re watching. The Dow Jones Transportation Index is sitting on it’s 200 day moving average...an area that it has tended to find support. That index is oversold here, so I'd expect a bounce of some sort. Let's see if it turns into a positive inflection point.
3.) COPPER – The Doctor is telling us that the AI trade is still on and that global growth is more likely than not…growing! Copper extended its gains — climbing back toward a record high set earlier this month — with signs of tightening supply conditions in China. In China, multiple copper refineries are due to undergo periods of planned maintenance between October and November, according to Shanghai Metals Markets, limiting a big increase in metal availability.
