Shipper Delivers Softening Outlook

Admittedly it feels strange to jump from a story about a new bull market to a potential recession indicator, but as history has shown us, the stock market is not the economy (and vice versa).

Anyway, today we heard earnings from the Danish shipping giant Maersk, giving us a read on the global economy. 🚢

The company reported better than expected revenue and earnings, driven by record-high shipping rates. It also raised its operating profit expectations for the year to a record $31 billion, up significantly from its earlier estimate of $24 billion. 📈

So, what’s the problem if this shipping giant is reporting record profits?

Investors are focused on the fact that the number of containers it loaded onto ships declined 7.4% YoY, prompting the company to adjust its expected demand growth toward the lower end of its -1% to 1% estimated range. In addition, the company noted that macroeconomic uncertainty and higher inflation continue to weigh on consumer and business sentiment. 🔻

The real message here is that the slowdown in the company’s shipping activity confirms what we’re seeing and hearing from many other companies and economic data points. 🐌

Global growth is slowing. Everyone pretty much agrees on that. The critical question for investors remains how bad will it get, and how long will it last?

Until that answer becomes clearer, expect market participants to analyze every major earnings report and economic data point closely. 🔎

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As we’ve discussed, much of the market’s recent rally has come on the back of hopes that the Federal Reserve will cut rates as much as six times in 2024. Disinflation continues across most major metrics, but a tight labor market has kept consumers spending and the economy humming along. As a result, Jerome Powell and the Fed have been hesitant to loosen financial conditions too quickly.

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