Planes and Trains: The Year Ahead
2016 has ended. As we leave behind a generally sluggish year we enter 2017 with new questions. Is it “Morning in America?”
The economic environment remains uncertain but, there is a sense of confidence in growing transportation traffic. The postelection jump in the Dow’s transportation average demonstrates the market is betting a Republican controlled Congress will enact policies that boost growth.
Bigger questions remain. As the New Year dawns the macro-economic environment faces an unstable global economy. World trade and the level of global economic growth drive transportation demand. Since no one knows the future, waiting is a classic way to react to uncertainty. Markets and world events are unpredictable. Until Washington’s policy decisions become clear most will proceed with business as usual. Class Ones will wait and see while remaining focused on the basics; pushing for efficiencies and ‘right-sizing’ resources based on the current facts on the ground. To counter rising jet fuel and labor cost, air carriers can be expected to manage capacity to lift ticket prices and generate new sources of revenue (expect more fare options and ‘amenities’ choices). The reality is that at current traffic levels the rails can offer better train speed while demanding less equipment. The result? New railcar backlogs and deliveries are dwindling.
How quickly will Washington’s actions make a difference? What will Congress choose to focus on first? Tax policy? Trade agreements? Infrastructure? Employment? Social programs? Regulatory relief? The markets seem to have responded to the Republican sweep by pricing in almost all, as if campaign promises will become policy day one. In an environment where growth and the elimination of unnecessary regulation and the efficient allocation of capital has a higher priority than concern for longer term inflation, equipment values will be stable to increasing.
What are the markets telling us? For 2017 globalism fades, political divisions continue, the U.S. Dollar remains strong, technological change continues, and relations with Russia improve. As you search for investment opportunity, a special degree of foresight and judgment will be needed for the year ahead. Avoid investing in events, and instead focus on the broader and longer term trends. Take advantage of the change expected in our political and policy reset. Expect fiscal stimulus and positive U.S. economic growth, but recognize that a freight car recovery will take some time. Investing requires a balance between risk and return and a focus on basic facts. It’s a simple equation but, in the actual world, the optimum balance is elusive. It has two ingredients, probabilities and consequences. Maintaining an ability to absorb risk, while retaining the opportunity for upside drives economic results. Face reality. See the world as it is.
2017? Industry leaders see the altered political landscape as the biggest change. A dramatic shift in the status quo for the world’s largest economy. Act accordingly.
Expect growth. RESIDCO. Thrive in 2017’s market. Contact us now!
 China, Russia, Iran, North Korea, the European Union; is Globalism fading?
 October 2016 AAR reports more than 350,000 cars in storage.
 Economic Planning Associates, 2016 new car deliveries 61,800; 2017 at 41,000 (or ‘about’ 39,000 per AllTranstek LLC). New car orders through October 2016 18,799 units, versus deliveries of 47,519 cars.
 “What separates the winners from the losers is how a person reacts to each new twist of fate,” — Donald Trump.
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