Cass Trucking Data Negative

Back in September I reported on how the data on US trucking from Cass Information Systems was not looking good for the stock market.  Since then the message has gotten a little bit worse, as seen in this week's chart.

Cass tracks trucking data in a lot of different ways, and publishes their own indices.  This week's chart shows the 12-month percentage changes in their Shipments and Expenditures indices.  Both measure trucking activity, but in different ways.  And what is important for our purposes is that these trucking data are well correlated to the stock market.

So it is NOT good news for the stock market to see that both of these indices are down year-over-year.  That is a condition reliably associated with bear markets for stock prices.  A couple of points are worth noting, though.

The first point is that Covid really screwed up the trucking industry, first by sending everyone home for "2 weeks to flatten the curve".  Then while everyone was home, they all decided to order a bunch of stuff online, resulting in big delays at US ports getting container ships in, and getting trucks to haul off those containers.  It was quite the bust-boom-bust cycle for truckers, and arguably the Cass Shipments Index (red line) still has not recovered.  The green Expenditures Index growth rate did go up above the zero level, but it is back down to below zero, showing shrinkage versus a year ago.  Having both of these at or below zero is not a good condition for the stock market.

EXCEPT!!  Point 2 is that when the Fed is doing QE, as they just started up again in December, the stock market can ignore that condition.  We saw in 2012-14 in the middle of the chart that during QE3 both of these indices were showing zero growth, and the SP500 just kept on trending higher.  It turns out that Fed money printing smooths over a lot of problems, for the stock market at least.

We know from how things turned out with QE1 through QE4 that while QE is happening, it is very bullish for stock prices irrespective of what the actual economy might be doing.  So earnings matter much less, and trucking data too.  We also know that shutting off the QE fountain tends to lead to bear markets, but that is a problem for another day.