FedEx Warns On Global Growth, But How Good Is Its Forecasting Track Record?

FedExFDX
stock has stock sold off over 20% after it updated its business outlook, saying that. “Global volumes declined as macroeconomic trends significantly worsened later in the quarter [ending August 2022], both internationally and in the U.S.” That’s a worry at a time when confidence in the global economy was weak to begin with. In fact, the FedEx CEO directly called for a “worldwide recession.”

A Warning For 2019

However, FedEx has warned like this before. In December 2018 the company warned of a slow down in the global economy and the stock sold off 10%. The next year global growth came in at 1.6%. That’s a little below average, but better than many feared, and FedEx stock was essentially flat for the year. So FedEx has unique insight into global trade, from its central position in logistics. However, that doesn’t always mean that it can call the global economy accurately.

Different Directions in 2020

Then 2020, which was, of course, a disaster for the global economy due to the pandemic was the best year in many decades for FedEx’s stock price. That year FedEx stock rose over 70% as FedEx’s distribution became critical to many households. It was among the best performing stocks for the 2020. So the trajectory of FedEx stock price doesn’t necessarily always match global growth.

Reasons To Be Cautious

Still, there are reasons to be cautious in the current market. The Fed has hiked rates dramatically. One year ago, U.S. government 1-year bills yielded effectively zero, now they yield 4%. That’s a dramatic move up in rates and the Fed has signaled that more rates highs are likely coming. In addition, U.S. growth has been negative for the first half of 2022. An inverted yield curve isn’t helping. In Europe there are warnings of outright recession. Things aren’t looking good, through the markets have fallen reflecting these concerns. One clear positive, though, is that the U.S. jobs market has held up better than many expected.

So there are definitely reasons to be cautious about the global economy. FedEx added to those fears today. That’s clearly a concern for investors in the stock, but the company’s ability to forecast the economic future should not be overstated.