The Stockout Show: Election special

(Image: FWTV)

On Monday’s The Stockout show, I discussed what the election results could mean for the retail and CPG industries. For those who prefer to read, FreightWaves’ Caleb Revill summarized it well. On the show, I went through four major issues: tariffs, taxes, the Federal Trade Commission and food regulations. Producing the show one day before Election Day, I also speculated on how the CPG and retail industries might vote based on their presumed self-interests in those issues.

The outcome of the election made the show more relevant since President-elect Trump was more of a change agent. In particular, the retail industry is wary of Trump’s tariffs, and the CPG industry is wary of a Trump administration overhauling the food and medicine industries by granting widespread power to Robert F. Kennedy Jr. In addition, the FTC could look much different, resulting in more leniency on mergers.

See Monday’s show here or check out the full The Stockout playlist here.

Proposed tax cuts expected to boost freight demand

For a discussion of why, check out last week’s State of Freight election special or Tuesday’s article written by Revill and John Gallagher. In short, tax cuts at both the personal and corporate levels should result in more economic activity. In addition, if tariffs have the intended effect of boosting domestic manufacturing, that production often involves numerous transportation points of handling in the supply chain. That contrasts with imported goods, which typically arrive finished.

LTL carrier Old Dominion Freight Line (NASDAQ: ODFL) is one of many freight carriers bouncing in Wednesday’s trading as the broad indexes also rise. (Chart: Yahoo! Finance)

Ocean rates should continue moderating from the currently elevated levels

Trans-Pacific ocean spot rates from China to the U.S. East Coast and U.S. West Coast are shown in white and red, respectively. On its webinar, Flexport described the recent volatility in inbound U.S. ocean rates as “extreme” and acknowledged how unusual it is that these rates are roughly at parity. The China to U.S. East Coast lane is typically about $1,000 per container higher than the China to U.S. West Coast lane. But, it did not offer an estimate on when the spread might return to the historical average. The rates for both trans-Pacific lanes appear set to decline next year, with capacity likely to increase faster than demand. (Chart: SONAR: FBXD.CNAE, FBXD.CNAW)

Barring something unexpected happening in ocean demand, ocean capacity is set to increase faster than demand in the coming years. That was one of the primary messages from Flexport’s Oct. 31 webinar. The company is expecting the supply of ocean capacity to grow by 8% in 2025 followed by an additional 6% increase in 2026 due to vessel additions to fleets. If carriers were to again fully utilize the Red Sea, the effective capacity deployed would increase much more. Meanwhile, demand is expected to grow by about 3% annually, which would be roughly in line with to slightly above growth rates of global GDP. I believe the election results and more protectionist trade policies create risk to that demand expectation, potentially creating another factor to pressure rates.