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Time for Shipping ETFs Amid Improving Global Trade Scenario?
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Global trade is showing promising signs of recovery, as evident from the insights of Vincent Clerc, the CEO of shipping giant Maersk. Despite recent challenges, Clerc anticipates a gradual rebound in the shipping industry as we approach 2024, as quoted on CNBC. Let’s delve a little deeper.
Consumer-Driven Demand
Vincent Clerc points to consumers in the United States and Europe will act as key tailwinds in the current surge in demand. These markets continue to defy expectations, consistently surpassing forecasts. In 2022, Maersk had warned of weak demand, citing overstocked warehouses, waning consumer confidence, and congested supply chains. However, the tide appears to be turning, with the upcoming pickup in shipping expected to be fueled by consumer consumption rather than an inventory correction.
Emerging Markets Resilience
Despite facing a challenging economic climate, emerging markets are representing an amazing resilience. Clerc highlights India, Latin America, and Africa as standout examples. These regions have managed to weather the storm and sustain demand, displaying their potential as growth drivers for the shipping industry.
North America's Strong Prospects
North America, although going through an economic slowdown along with other major economies, remains a promise for the shipping sector. Macroeconomic factors, including Russia's invasion of Ukraine and tensions with China, have disrupted the region's trade dynamics. However, as these issues normalize, Clerc anticipates a rebound in demand.
The Fed recently revised upward their economic growth forecasts for the current year, with GDP expected to rise by 2.1%, more than double the June estimate. This suggests an expectation of continued economic expansion without an imminent recession. The GDP outlook for 2024 also increased from 1.1% to 1.5%. In fact, rates are also peaking in the United States.
Against this backdrop, below we highlight a few shipping ETFs that could be tapped for gains over the medium term.
The underlying Capesize 5TC Index, Panamax 4TC Index & Supramax 6TC Index measure rates for shipping dry bulk freight. The expense ratio of the fund is 3.50%.
The underlying Solactive Global Shipping Index consists of global shipping companies engaged in the maritime transportation of goods and raw materials, including consumer and industrial products, vehicles, dry bulk, crude oil and liquefied natural gas. The fund charges 69 bps in fees and yields 15.98% annually.
The underlying U.S. Global Sea to Sky Cargo Index tracks the performance of marine shipping, air freight and courier, and port and harbour operating companies. The fund charges 60 bps in fees and yields 17.13% annually.
Any Wall of Worry?
Despite the positive outlook, the way to boosting global trade and growth is not without hindrances. Kristalina Georgieva, IMF Managing Director, pointed out that for the first time, global trade is growing slower than the global economy, with trade at 2% and global growth at 3%. This is a real concern.
Georgieva stressed on the need to create corridors and opportunities to revive trade. She specifically referenced a proposed rail-to-sea economic corridor connecting India with Middle Eastern and European countries as a potential solution to address the challenges facing global trade, the CNBC article pointed out.
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Time for Shipping ETFs Amid Improving Global Trade Scenario?
Global trade is showing promising signs of recovery, as evident from the insights of Vincent Clerc, the CEO of shipping giant Maersk. Despite recent challenges, Clerc anticipates a gradual rebound in the shipping industry as we approach 2024, as quoted on CNBC. Let’s delve a little deeper.
Consumer-Driven Demand
Vincent Clerc points to consumers in the United States and Europe will act as key tailwinds in the current surge in demand. These markets continue to defy expectations, consistently surpassing forecasts. In 2022, Maersk had warned of weak demand, citing overstocked warehouses, waning consumer confidence, and congested supply chains. However, the tide appears to be turning, with the upcoming pickup in shipping expected to be fueled by consumer consumption rather than an inventory correction.
Emerging Markets Resilience
Despite facing a challenging economic climate, emerging markets are representing an amazing resilience. Clerc highlights India, Latin America, and Africa as standout examples. These regions have managed to weather the storm and sustain demand, displaying their potential as growth drivers for the shipping industry.
North America's Strong Prospects
North America, although going through an economic slowdown along with other major economies, remains a promise for the shipping sector. Macroeconomic factors, including Russia's invasion of Ukraine and tensions with China, have disrupted the region's trade dynamics. However, as these issues normalize, Clerc anticipates a rebound in demand.
The Fed recently revised upward their economic growth forecasts for the current year, with GDP expected to rise by 2.1%, more than double the June estimate. This suggests an expectation of continued economic expansion without an imminent recession. The GDP outlook for 2024 also increased from 1.1% to 1.5%. In fact, rates are also peaking in the United States.
Against this backdrop, below we highlight a few shipping ETFs that could be tapped for gains over the medium term.
ETFs in Focus
Breakwave Dry Bulk Shipping ETF (BDRY - Free Report)
The underlying Capesize 5TC Index, Panamax 4TC Index & Supramax 6TC Index measure rates for shipping dry bulk freight. The expense ratio of the fund is 3.50%.
SonicShares Global Shipping ETF (BOAT - Free Report)
The underlying Solactive Global Shipping Index consists of global shipping companies engaged in the maritime transportation of goods and raw materials, including consumer and industrial products, vehicles, dry bulk, crude oil and liquefied natural gas. The fund charges 69 bps in fees and yields 15.98% annually.
U.S. Global Sea To Sky Cargo ETF (SEA - Free Report)
The underlying U.S. Global Sea to Sky Cargo Index tracks the performance of marine shipping, air freight and courier, and port and harbour operating companies. The fund charges 60 bps in fees and yields 17.13% annually.
Any Wall of Worry?
Despite the positive outlook, the way to boosting global trade and growth is not without hindrances. Kristalina Georgieva, IMF Managing Director, pointed out that for the first time, global trade is growing slower than the global economy, with trade at 2% and global growth at 3%. This is a real concern.
Georgieva stressed on the need to create corridors and opportunities to revive trade. She specifically referenced a proposed rail-to-sea economic corridor connecting India with Middle Eastern and European countries as a potential solution to address the challenges facing global trade, the CNBC article pointed out.