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The Truth About Transports

|Includes: FDX, iShares Transportation Average ETF (IYT), UPS

The Dow Theory holds that sectors confirm one another as the true sign of economic growth. Primarily, if manufacturing is growing, shipping of raw materials such as coal, steel, etc. will show an increase in transports-especially railroads. Additionally, moving the manufactured goods to the consumer will show an increase in freight mostly by trucking. Tangentially, airlines should also see growth in air freight, as well as business and leisure travel.

The logic of the theory developed at the turn of the 20th Century is correct. However, over 100 years later, it may not be the reflection originally intended. To understand this we need to look closely at the transportation index.

iShares Dow Jones Transportation Index Fund (BATS:IYT) tracks the Dow Transportation Index.