How the Supply Chain and Logistics Companies Were Affected by Stock Market Collapse

The recent stock market decline had many investors worried this week when the Dow Jones Industrial Average fell 58 points, or 0.4%, to 16596 and the S&P 500 was down 0.2%.

It was, in fact, the most volatile week in markets in years and investors also worried about the downturn in China and other large economies. Because of this, logistics companies were also seeing plummeting share prices.

FedEx Corp.’s shares were down about 9% during the morning rout until Monday afternoon to which it recovered slightly up to 4.3%. Moreover, global carriers such as United Parcel Service Inc. and Deutsche Post AG also saw declines. UPS was off 3.5% at $98.58 and DHL ended down at 4% at $23.58.

Much of the concern for the stock market decline is how volatile the global economy affects logistic companies as trade slows down. The downturn also affects the supply chain as logistics companies depend on sourcing and selling products abroad.

Companies such as FedEx and UPS were relying on international growth to help domestic businesses as well as investments abroad. However, FedEx in particular has been selling off more than UPS because of the slowing growth in Asia, according to transportation analyst, Jack Atkins.

Transportation and logistics analyst, David Ross from Stifel says the trend of companies moving their supply chains abroad may have already peaked and the best times are over. “Supply chains are starting to shift to become a little bit more regional. Global trade should grow slightly in excess of GDP, not two or three times GDP,” said David Ross.

“It’s just a question of (whether) global trade worsens or not,” said Ross of Stifel. It’s still possible for logistics companies to continue to grow as long as global trade continues to expand and we see an improvement in China.

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We would like to thank The Wall Street Journal for the informative article.