Year to date Rail carloads through the end of April totaled 3.63 million, down 4.8% from last year. Total carloads have fallen year over year in each of the first four months of this year. Excluding coal however, total carloads are up 2% over April 2023 and have risen year over year in each of the last three months. April coal averaged 46,303 carloads per week, down 28% from April 2023. Coal accounted for 21.8% of non-intermodal U.S. rail volume in April, coal’s smallest share for any month as reported by the AAR Policy and Economics Department. Unseasonably early warm weather resulted in record low natural gas prices which resulted in a significant decline in coal demand. However, low natural gas prices benefit plastic producers who use natural gas as a feedstock and/or an energy source (rail carloads of plastic are up this year). Rail Labor issues loom as Teamsters Canada may simultaneously strike both of Canada’s large railroads (CN, CPKC). Under Canadian labor law, the unions cannot begin a strike until the Canadian Industrial Relations Board issues a decision regarding whether the two roads must continue to transport essential goods during a strike.  

At his May 1 press conference, Fed Chairman Jerome Powell said, “While the economic outlook is ‘uncertain’ growth to date has been solid,” citing robust consumer spending, improving supply conditions, and a labor market that remains relatively tight. Interest rates were held steady at that meeting and the Fed is expected to hold rates steady at their next meeting June 11-12. Average hourly earnings for non-supervisory and production workers were 4% higher in April than a year earlier. With consumer inflation not yet under control the Conference Board’s Index fell to 97.0 from 103.1 in March, the third consecutive decline and its lowest level since July 2022.

Records were broken at U.S. airports over the Memorial Day weekend. The Transportation Security Administration said they screened nearly 3 million people on Friday alone, breaking a single-day record. U.S. airlines expect to carry a record number of passengers this summer, 271 million between June 1 and August 31, which would break the 255 million record set last summer. Airfares are down 6% from a year ago so there has been no slowdown at airports. American is offering its most ambitious summer schedule ever – 690,000 flights between May 17 and September 3rd. United had expected nearly 10% more Memorial Day passengers than last year, Delta expected 5% more. Delta is scheduling its heaviest summer international flight schedule ever (London, Paris, Rome). New aircraft delivery delays continue as Boeing continues to slow production to resolve production quality issues, delivering only 67 737 Max in the first quarter and 16 in April. Boeing’s total aircraft deliveries (24) in April were the lowest in a month since February 2022, which of course tightened demand for existing aircraft.

Summer uncertainties create market opportunities. Turn those uncertainties into opportunities by obtaining more information, measuring probabilities, using models to look for patterns, seeking to diversify exposure, stress testing, ensuring you are getting paid for the risk you are taking, and that the investment risk you take remains within tolerances set by the firm’s stakeholders.

This summer, Aero and Rail opportunities that deliver excess returns per unit of risk exist. For additional details Call RESIDCO.

Glenn Davis 312-635-3161

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