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Transportation index (DJT) points to economy slowdown, so they say…

Transportation index (DJT) is usually considered a good indicator of the US economy.

An old say goes – “manufacturing makes, transportation takes”. Transportation is considered a leading indicator and usually slows down first before we notice in any major indexes or economic reports.

Some investors use DJT for economic forecasting.

There is however a major issue with this. Even transportation works in waves. You have weeks or months of slowdowns and weeks or months of strong transportation demand. Saying that we are in trouble because DJT is in decline may not show the entire picture.
It is definitely a concern to pay attention to but not to panic and close all your position or go 100% cash.
Below is a chart showing DJT in correlation with DOW (violet color) and S&P 500 (blue color). As you can see, we saw three slowdowns in DJT and three times the markets responded to it. But then the index rebounded and the markets saw another all time high rally.
So add the overall economic growth (GDP reached 3% for the first time in a decade) and you will see that this is probably just a dip.
I added 5 year and 20 year charts for perspective. As you can see, the transportation is still growing well and there is no concern over the economy and its growth. Of course, it may change all on a dime so keep an eye on it but do not overreact.

S&P 500 intraday

S&P 500 intraday

S&P 500 intraday

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