US-listed shipping shares are continuing to start the new year in a brighter fashion than broader market indices amid what could be a changing investor focus toward the market.
The 30 stocks under coverage of investment bank Jefferies climbed Friday to an average 1.8% gain over the prior week, against a 0.3% drop in the S&P 500 and a 0.8% fall in the small-cap Russell 2000 index.
This continues a trend, albeit brief, in which the Jefferies Shipping Index has gained 4.3% year to date compared to a drop of 2.2% in the S&P and 3.8% in the Russell.
All those numbers came in before a significant drop in the broader market on Tuesday, as investors appeared to react both to rising bond yields amid expectations of higher interest rates, and some poor corporate earnings in the financial sector. US markets were closed on Monday.
The Dow Jones Industrial Average was down more than 1% to 35,700 in morning trading on Tuesday in New York, with most shipping names turning red as well.
Ahead of the day's developments, shipping has held up well so far in 2022, with the Jefferies index also up 47.5% year over year.
"One trend you’ll notice above is that the equities are starting to outperform the weekly rate movements," Jefferies lead shipping analyst Randy Giveans told TradeWinds.
The case for shipping
He cited two reasons.
"First, 1Q softness has been well telegraphed and expected by most, so weekly changes in spot rates are less important during this time," he said.
"Second, with an ongoing rotation from momentum and growth stocks to economically-sensitive, global trade-driven, value stocks, we believe shipping remains the place to be in 2022."
As TradeWinds has reported, the rising interest-rate environment set to unfold has caused mixed opinions on whether shipping will outperform given its asset-backed nature, or wind up thrown out with the bathwater if investors fleet small-cap stocks more broadly.
The positive move in the last week was led by container ships, which rose an average of 6% as rates continued to climb.
The trend was led by Israeli liner company Zim, which surged 12.6% – the only double-digit gain by a shipowner on the week.
"Over the next few months, we expect Zim to continue to have some very strong weekly gains," Giveans said of the stock that was among the biggest winners in 2021.
