Shipping demand predicted sharp decline and recovery in the stock markets

As we all know, March 2020 was a poor month for the stock markets. This was driven by a global sell off in equities due to the expected reduced economic activity from the effects of COVID-19. April 2020 was a great month, with the global markets pricing in a quick recovery.

Interestingly, daily trends in global cargo mile demand data, as observed through our Trade service, forecasted this sharp decline and the recovery in the stock markets. This can be seen in the charts below relating to daily updated Capesize and Post Panamax cargo mile demand (red line) to the S&P 500 (grey line). 

For Capesizes, a bell weather of industrial activity, cargo miles started to decline sharply in mid January, about a month before the stock markets started to crash. Cargo miles started to recover early March, again about a month before the stock markets started reaching their inflection point and started their recent upwards trajectory. For Post Panamax Containerships, a good indicator for trade in consumer goods, the decline in demand came slightly later at the start of February but still preceded the stock market selloff in early March. The shape and speed of recovery was similar, starting in early March and foreshadowing the recovery in the stock markets in from the start of April.

Hindsight is a great thing, and these calls would have been very hard to make while watching the stock markets dive through March. However, there was potentially a lot of money to be made by reading the tea leaves of shipping for those who know where to look and how.