Dow transports is one of the most widely watched sub-indexes in the world. Often referred to as the dow jones transportation average or dow jones transportation index, this index tracks the largest transportation stocks based in the United States. It is a great indicator for examining the overall health of the United States economy. That’s because transportation can be thought of as a sort of “canary” in the mine, when it comes to economic health.
The dow transportation index tracks both the movement of people and goods. The dow transport average also looks at a wide range of transportation industries. This includes as railroad, airline, trucking, rental services (think car rental) and marine transportation. The stocks contained range from major airlines, to UPS, to the Union Pacific rail road.
If you are investing heavily in transportation stocks, and some of these transportation stocks do indeed look like solid investment options, than watching the dow transportation average is pretty much a must. Investors should watch it as closely as the larger DJIA and S&P 500 and other indexes.
Even if you are not investing directly in transportation, however, you should keep an eye on the dow transportation indice. Dow jones transportation is useful to watch for both keeping an eye on transportation stocks, and also watching the overall health of the economy.
Why transportation is a good indicator for the larger economy
The transportation industry, which the dow transportation index basically tracks, is a good indicator of the health of the economy. If shipments slow down and goods are not moving as quickly as usual, then it hints at the possibility that demand from consumers and businesses is slowing. Orders might be dropping, suppliers might not have orders to fill, and companies may be cutting what they produce, among other things. Also, business persons and families may not be traveling, online consumers may not be ordering as many goods, and other things may be occurring.
Looking at the transportation system can be thought of as looking the veins in a person’s body. In sense, the transportation industry is the “life blood” of the larger economy. The dow index tracks the industry within the United States, so it shows the “life blood” of economic activity within the U.S.
A Closer Look at Some Of the Dow Transport Index Companies
Let’s take a closer look at the transportation companies listed on this particular Dow Index. First up, the index contains a lot of airline companies that many Americans (and travelers in America) are probably familiar with. There’s Alaska Air Group, American Airlines, Delta, and Jetblue, among others. Some of these are luxury airliners, others budget, so the index looks at a wide spectrum of who’s traveling.
There is also a car rental company on the list, Avis. Often, car rental can be thought of as a sort of add on service for air travel as people need cars when they reach their destination. This isn’t always true, however. Anyways, the Dow Transport average features Avis, one of the largest rental companies.
Couriers and Shippers
Federal Express, or FedEx as it is more commonly known, as well as the United Postal Service (UPS), are also listed on the index. Mostly, these companies handle the shipping of goods, and are especially well-known for shipping products to homes and businesses. These companies are great indicators for the larger economy in-and-of themselves.
Another less well-known shipping company on the list is Expeditors International. This company focuses primarily on international shipping, rather than domestic. It is much smaller than UPS and FedEx, but is still a multi-billion dollar company. Watching this company will give you a good idea of how many goods are flowing out of and into the United States on an international basis.
Many of America’s first truly wealthy self-made families made their money off of rail roads. In many ways, rail roads can be considered the first truly modern mode of transportation. While rail roads are not quite as central to America as they once were, they are still an important industry, especially for companies and industries. Rail roads still offer arguably the best way to ship large, heavy shipments across land.
Speaking of land, the Dow Jones Transportation Average also tracks trucking companies. The trucking industry is very important in the United States and many, many companies rely on trucks to transport goods. When the trucking industry slows down, you have to take note. C.H. Robinson, JB Hunt, and others make the Dow Transport Index.
Marine shipping companies also populate the shipping index. Matson and Kirby Corp. both represent marine shipping companies. Most marine shipping companies ship internationally. Both Matson focuses on U.S. to Hawaii, and Kirby focuses on shipping up and down the Mississippi.
There are other companies on the Dow Transport Index, but by now you almost certainly get the idea. Shipping is huge in the U.S. and a great indicator of the economy!