Few sectors are as telling of the health of the broader market and economy as the rail sector is.
Economic data such as the gross domestic product or gross national product, available only quarterly, are backward-looking and subject to revisions or tweaks down the road, so they offer little clarity into potential economic growth ahead. The trading action in rail stocks, however, acts as a real-time gauge of import and export demand both domestically and internationally, thus serving as an important economic barometer of the health of the global economy.
For example, if per-ton rates and cargo levels per hopper or railcar are high, it's safe to assume that worldwide demand for various commodities are also running high, thus hinting at a robust global growth picture.
The rails still have the lowest costs for moving freight of any shipper, and for now, decreased fuel surcharges are bulking up their bottom lines. If the economic recovery plan starts to work, the rails will benefit as volume of freight increases again.
Keep an eye on the following stocks as an indicator of the world's economic health.
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