FedEx
FDX
Shares sold off more than 20% after it updated its business outlook, saying so. β€œGlobal volumes declined as macroeconomic trends deteriorated significantly later in the quarter.” [ending August 2022]both internationally and in the US β€œThis is a concern at a time when confidence in the global economy was initially weak. Indeed, the FedEx CEO directly called for a ‘global recession’.”

Warning for 2019

However, FedEx has warned like this before. In December 2018, the company warned of a global economic slowdown and sold the stock by 10%. Global growth the following year was 1.6%. That’s a little below average, but better than many feared, and FedEx stock has been basically flat for the year. So FedEx has unique insight into global commerce, from its central position in the logistics space. However, this does not always mean that it can accurately connect to the global economy.

Different trends in 2020

Then 2020, which was, of course, a disaster for the global economy due to the pandemic, was the best year in many decades for FedEx stock price. That year, FedEx stock rose more than 70% as FedEx distribution became critical to many families. It was among the top performing stocks of 2020. So the trajectory of FedEx’s stock price doesn’t always necessarily match global growth.

Reasons to be careful

There are still reasons to be cautious in the current market. The Federal Reserve raised interest rates significantly. One year ago, one-year US government bond yields were virtually zero, now yielding 4%. This is a major price move and the Fed has indicated the possibility of more price hikes. Additionally, growth in the US was negative in the first half of 2022. An inverted yield curve doesn’t help. In Europe there are warnings of an outright recession. Things are not looking right, the markets have fallen, reflecting these concerns. However, one clear positive is that the US job market has held up better than many expected.

So there are certainly reasons to be cautious about the global economy. FedEx added to those concerns today. This is clearly a concern for equity investors, but the company’s ability to predict the economic future should not be overstated.