Transportation stocks are rallying, signaling investor confidence in the economy's outlook.
The Dow Jones Transportation Average, which tracks 20 large companies ranging from railroads to airlines, is up 10% this year and approaching an all-time high. The index recently notched its longest winning streak since August 2020, according to Dow Jones Market Data, and in recent weeks has left the tech-heavy Nasdaq composite in the dust.
Shares of Delta Air Lines, Expeditors International and Ryder System are all up more than 15% this year and recently touched records. Avis Budget Group has risen 63%, while C.H. Robinson Worldwide has gained 52%, Uber Technologies has climbed 41%, and Southwest Airlines has added 22%.
The transportation rally is a good sign, some analysts said. Airline, trucking and railroad stocks are considered market bellwethers, given their vital roles in moving goods and raw materials that power the economy.
And their movements are closely tracked. During the height of Trump's tariff whiplash last spring, traders monitored shipping and logistics data, including the number of import containers at the ports of Los Angeles and Long Beach and orders for heavy-duty trucks in North America, for insights into the economy's health.
Recent figures that were delayed because of the U.S. government shutdown have assured investors that the economy is cooling but not cratering. The Federal Reserve on Wednesday cut interest rates and left the door open to more cuts in 2026. Those factors have emboldened investors to pile into shares of transportation companies.
"It's been quite a comeback," said Matt Orton, head of market strategy at Raymond James Investment Management. "These stocks have been forgotten for a long time, and the economy has held together much more than we thought."
Investors will get another read on the economic outlook on Tuesday, when the Labor Department releases its report on U.S. job growth and unemployment in November.
The breakout in transport stocks has brought relief to investors who fretted that the outsize influence of Big Tech stocks in this year's stock rally could leave the market vulnerable to a downturn if a few heavyweights drop. Shares of other economically sensitive stocks including the Russell 2000 index of smaller companies have clinched records in recent sessions.
The rally has also revived interest in Dow Theory, an investing idea that made its debut before the Wright brothers' first flight. The theory posits that gains in transport stocks bode well for the broader market and its continuing rally. For it to work, proponents say, any new highs reached by the Dow Jones Industrial Average must be accompanied by fresh records by the Dow transports.
The Dow industrials have notched 18 closing highs this year, while recent gains by transportation stocks have brought the transport index to within 1.4% of its record close, set in November 2024.
Conversely, a lagging transportation average might presage a decline in the overall market.
That is what happened earlier this year, when Trump's trade skirmishes blunted shipping demand and spurred fears of a recession. Uncertainty over tariffs led shipping companies, which had started to recover after struggling with an inventory glut and slowing consumer spending for years, to push off their forecasts for a recovery.
Things have looked up since then. FedEx in September forecast 4% to 6% annual revenue growth for the current fiscal year, after withholding a prediction in the summer because of economic uncertainty.
Uber reported in third-quarter results that trips rose 22% from a year earlier and said it expects its gross bookings to continue growing. Delta Air Lines said that demand looks strong heading into next year.
A series of rate cuts by the Fed has given investors another reason to expect the economy to keep growing in 2026.
"The U.S. economy remains on solid footing, and our customer base is financially strong," Ed Bastian, Delta's chief executive, said on an October earnings call.
Analysts say that challenges remain. Trump's ongoing trade disputes and a Supreme Court case about whether his levies stand have left investors with little clarity. Some economists warn that it could take several more months before the full effects of tariffs start showing up in inflation data.
Consumer sentiment, as measured by the University of Michigan's survey, has hovered near historic lows recently, weighed down by high prices, a frail job market and concerns about Trump's trade war. Americans from less-affluent households are becoming pickier about the purchases they make.
Some also worry that the economy isn't as strong as it appears. Fed Chair Jerome Powell said that central bank staffers believe that federal data could be overestimating job creation by up to 60,000 jobs a month. Given published figures show the economy has added around 40,000 jobs monthly since April, the real tally could be closer to a loss of 20,000 jobs a month, he said.
Still, most economists don't think the economy is headed for a downturn. Earnings reported by companies in the S&P 500 are projected to grow by 8.1% in the fourth quarter, according to FactSet. For 2026, analysts see profits increasing by 14.5%. Investors also expect lower rates and tax cuts to take some pressure off Americans' ability to spend.
"Our view is that consumption is going to remain pretty robust," said Charlie Ripley, senior investment strategist for Allianz Investment Management.
