The Dow Jones Transportation Average has recently notched fresh all-time highs. Following a sizable relative performance dip earlier in the year, the Transports’ relative strength has recovered and moved to new 2020 highs (Chart 1). Still, compared to the broad market, the index’s YTD return appears fairly unremarkable, outpacing the S&P 500 by about 3%.
Transportation stocks have confounded conventional wisdom about their presumed relationship with oil during the past three years.
While stock market action YTD has not been quite as “uniform,” the hallmarks of an imminent bull market top are simply not present. The bullish portents apply to intermediate term results, however, they cannot rule out any short-term setbacks (which can appear with no tip-off from breadth or leadership measures).
Bull markets rarely come to an end prior to the Transports exhibiting weakness. Their outperformance continues this year, returning an impressive +9.9% through June 4th, almost doubling the S&P 500’s +5.2%. We examine the underlying Transport groups and assess which areas are providing the strength to help sustain the Transportation Index’s leadership.