Last month, package delivery company FedEx tumbled 31%. That was twice as much as the overall market.
The company revealed the reason soon after on its December 18, 2018 earnings call…
FedEx didn’t tumble because it dropped the ball last quarter. In fact, the company beat its revenue and earnings guidance.
But investors look forward. And they sensed FedEx would have problems this year.
The company confirmed those fears on its earnings call: It lowered its earnings guidance by 10%.
Here at the Daily, we usually stick to the big, macro issues of the day. But sometimes, a single company can signal a larger trend in play. And FedEx’s struggles don’t bode well for the world economy in 2019…
Global Growth Is Slowing
“Peak economic growth may be behind us.”
That’s what FedEx Express CEO Raj Subramaniam told investors on the earnings call.
Founder and chairman Fred Smith explained why: politics. Here are his closing remarks on the call:
I’ll just conclude by saying, most of the issues that we’re dealing with today are induced by bad political choices. I mean, making a bad decision about a new tax, creating a tremendously difficult situation with Brexit, the immigration crisis in Germany, the mercantilism and state-owned enterprise initiatives in China, the tariffs that the United States put in unilaterally. So you just go down the list, and they’re all things that have created macroeconomic slowdowns.
Basically, Smith sent out an economic warning to Wall Street.
If you read between the lines, he’s saying that nationalistic movements are beginning to impact the global economy—specifically in trade.
And we shouldn’t just dismiss Smith’s warning as one company looking for a scapegoat. FedEx has implemented its plans perfectly this past year. As I mentioned above, it beat both revenue and earnings estimates.
The company delivers packages around the globe. Before businesses can make their products or record sales, they need deliveries. So if there’s any slowdown coming, package delivery companies like FedEx will feel it first.
Now, this shouldn’t surprise regular readers…
Last September, I met with ginseng and cranberry farmers in Wisconsin. At the time, they told me that President Trump’s trade war had not yet affected their operations.
Most companies already had sales contracts in place for the year. But as these contracts are renegotiated, we could see a slowdown.
This past summer, we thought the trade war would wrap up soon. But by the end of October, it became apparent that it wouldn’t. And if trade disputes continue into 2019, we could see the prices of goods and products increase.
Now, FedEx is telling us that the chickens are coming home to roost… and we’re going to see an economic slowdown as nationalistic policies sweep the globe.
FedEx Has Predicted the Future Before
FedEx has been a good bellwether of the overall economy over the past two decades.
It declined before the market crashes in 2000 and 2008—and even led the market down before the stealth bear market at the end of 2015.
So when FedEx sends a warning… it pays to listen.
And right now, FedEx is saying the economy is slowing. If President Trump doesn’t resolve trade issues with China, more pain is ahead.
That’s why you need a game plan now…
Personally, I’m starting to take quick profits on any long trades. And until the market changes character (closes above its 200-day moving average), I’m looking to sell any short-term rallies.
For any long-term investments, check your theses for investing. If they’re still intact, don’t panic-sell. Trust your research and wait out these fluctuations.
And dust off your stock wish-list…
We’re starting to see some great companies trade at discounts. When things get resolved, we’ll see them move higher.
Analyst, The Palm Beach Daily
The Wild Ride Continues
2019 started much the same way 2018 ended—with a lot of volatility.
Yesterday, the S&P 500 opened down 1.5%. At one point in the afternoon, it was up 0.5%. That’s a large, two-point intraday swing. In 2017, this was unheard of. Now, it almost feels normal.
I have little expectation for this week… Many Wall Street traders have extended their vacations an additional three days due to the shortened holiday week. So expect lower volume and a little extra volatility.
As I mentioned above, the 200-day MA is a good gauge of market health. The market typically remains volatile when it’s below that important psychological benchmark.
And as you can see, stocks are still well below the trend line:
If you can’t stomach the volatility, there’s nothing wrong with holding more cash.
But as I wrote last Wednesday—before the market rallied 7% over three days—the broad market is still in an uptrend.
So now might be time to take a stab at entering some of your favorite long-term plays… It’s something I’ll be exploring in the Daily over the next couple days.
Some holiday house-cleaning in the mailbag as we enter the new year…
From Chuck W.: A few years back, I signed up for the initial PBRG newsletter and learned about options trading and a whole lot more. It eventually led to an opportunity to subscribe as an Infinity member—one of the best investments I’ve made. It’s increased my investing knowledge and wealth.
And I’m grateful for Mark Ford’s little gems of wisdom on wealth-building. I enjoy reading anything he writes. Thanks, Mark.
From Sara S.: I’m a big fan and follower of Teeka. He’s been my inspiration for making my investment decisions. I’d like to offer my sincere thanks for his service to the crypto community as a whole.
From John B.: Wishing Teeka and team a happy and prosperous New Year. Many thanks for all you do—your guidance, constant coaching, and perspective. You are the best and really go the extra mile to help your subscribers out.
When we think of American energy… Texas, North Dakota, Alaska, Oklahoma, and California are the states that come to mind.
But that’s about to change rapidly. America has a new energy haven.
Buried in Lemhi County, Idaho, a new type of fuel can be found that most Americans are clueless about. And energy insiders are getting set to take this new fuel mainstream…