It is safe to say President Elect Donald Trump’s election has incited a great deal of controversy and division in our country. Yet, in the stock-verse, it is a bit of a different tale, with an unlikely victor: shipping stocks, like Globus Maritime Ltd (NASDAQ:GLBS) (up nearly 152%), Diana Containerships Inc (NASDAQ:DCIX) (up nearly 169%), Sino-Global Shipping America, Ltd. (NASDAQ:SINO) (up nearly 151%), and DryShips Inc. (NASDAQ:DRYS) (up nearly 58%) are reaping the benefits.
Investors are throwing out explanations from Trump to quant trading (trading particularly focusing on mathematical and statistical analysis), and an economic gauge known as the Baltic Dry Index. Yet, trying to work out the jigsaw puzzle that is the election and an unexpected upswing in shipping stock price valuation raises some questions along the way.
Rather than delve into the sophisticated ins and outs of algorithmic trading, here’s what you need to know: like all roads once led to Rome, they are now pointing, for better or for worse, to the man in charge of our nation’s future- Donald Trump, the common denominator behind it all.
What does it mean that the Baltic Dry Index escalated a solid 25% after Trump won the presidential race? This benchmark tracks the shipping industry and offers a bit of a preview as to present and forthcoming demand, measuring the expense in shipping raw materials. So, long story short: investors who see the index surging forward want to buy in on the optimism.
Perhaps the market’s shipping sector is jumping on hopes that a switch-things-up political turnover might yield inflation or an impetus to the fiscal world on back of the man’s campaign promises for global trading changes.
Those who elected Trump liked his brazen speeches foretelling of trade agreement renegotiation and an economic makeover. For stocks suffering from investor pessimism due to a dark cloud of bankruptcy, like the one that has been hanging over DRYS, perhaps there are those gambling that with better trade and shipping, the market might become less hostile.
Nonetheless, this age-old adage stands the test of time: What comes up must come down. Not to spoil the stock party, but many experts say to be wary in a case of shipping stocks verging on being overbought, where when stocks rise with such volatility and unexpectedly, they could collapse in a sharp reversal just as swiftly.
Whether the shipping sector is on the brink of capsizing once again as quickly as it swelled is another question entirely. Yet, optimism should be carefully balanced with realism, to avoid any financial casualties or walking any steep, overbought stock planks.