FedEx reported earnings this week and is a company to watch because freight demand is a great indicator of economic activity.
Here’s Bree Carrier, Executive Vice President and Chief Customer Officer:
“I was concerned before the quarter that we might see some demand destruction. That was not the case at all.”
Raj Subramaniam, President and CEO
“We are working to grow revenues in the most important sectors of the global economy.”
Taken together, these two quotes highlight what is going on in the global economy and especially in the United States. Surprisingly, growth is able to withstand shocks such as Trump’s tariffs and the Iran war. This is a very good thing. Second, the top layer of the economy is doing very well. I wouldn’t call it a K-shaped economy anymore, because the bottom of it doesn’t go down. It will either move sideways or rise only slightly.
I think this represents a good baseline for investing right now, and the resilience of economies in Europe and elsewhere despite these shocks points to upside growth risks.
“There’s a little bit of inventory buildup and restocking,” Carrere said.
Another line of it says, “We are seeing these initial, time-critical shipments quickly turn into larger, repeatable revenue streams,” indicating growth in customer and business spending and confidence.
Finally, with AI driving everything right now, it’s important to highlight that even FedEx is a beneficiary of the AI capex boom, as Carrier said:
“The AI and data center space is an emerging and rapidly expanding growth engine for us, delivering double-digit revenue growth,
Care said.
This is a sign that capital spending on AI is expanding. In the coming quarters, I expect the intense focus to remain on earnings from large caps and chip names as that is the battleground now but there is merit to be gained from investigating how spending flows through the economy.
