The FedEx Factor–Delivery Firm Sees Global Recession Dead Ahead
On Thursday, FedEx announced that the company has lowered its revenue target in the near term. It will miss Wall Street earnings expectations for its August 31 earnings report. As you would expect, FedEx shares fell by 22% on Friday after the Thursday, September 15 announcement.
Consequently, they are closing stores and offices and hiring fewer people than they ordinarily would be going into the normally busy holiday season. That’s a big deal. Global shippers don’t close stores unless they see a very clear reason not to keep them open.
The takeaway is that shipping companies have their finger on the pulse of global trade. When they’re ultra-busy, the global economy is hopping. When they’re closing business centers going into the end of the year, that’s a very bad omen. The take away is clear. Global trade is heading into a recession because global economies are doing so.
As FedEx CEO Raj Subramaniam said in a media interview Thursday evening, “Global volumes declined as macroeconomic trends significantly worsened later in the quarter, both internationally and in the U.S.,” Subramaniam said in a statement.
But it’s not just what FedEx thinks about the growing prospects for global recession that’s more than just a little disconcerting, but what investors fear about upcoming actions by the Federal Reserve as well. Bleakley Advisory Group Chief Investment Officer Peter Boockvar told CNBC that the Fed’s next rate hike will spark a “dangerous game” with the economy because it is continuing its rate hike with a rearview mirror viewpoint of the economy.
Boockvar accepts that a .75-point hike at next week’s FOMC meeting is a given, but warns that the economy is already showing signs of a slowdown, but that BLS doesn’t capture and report employment data in real time, but rather, is lagging, so the Fed is behind the curve on what’s really going on in the economy.
As a consequence, the Federal Reserve risks over-rotating on its counter-inflationary rate hikes, and may well do more harm than good. In fact, the Fed’s monetary tightening and potentially excessive rate hikes may trigger a liquidity crisis later this year that could crash the markets.
The Federal Reserve would do well to consider FedEx’s proactive actions on what they see as a global recession that’s coming so fast that they (FedEx) is closing stores and slowing hiring right now, BEFORE the FOMC and of course, before the holiday season arrives.
