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Why Are Shipping Stocks Up?
A surprise result of the election of Donald Trump is that shipping stocks are up. This is the guy who promises a trade war with China and Mexico if not everyone else. Forbes writes about the Donald Trump shipping stock boom.
Euroseas is a tiny Greek shipping company with a fleet of 12 vessels and a penny stock traded on Nasdaq. On Tuesday, Euroseas’ shares rose by 100%. Since Donald Trump was elected president, Euroseas’ stock has nearly quadrupled. Seanergy Maritime, another small dry bulk shipping company that moves grain and coal, saw its shares soar by 75% on Tuesday. Shares of DryShips, a Greek shipping company that recently looked like it could be headed for bankruptcy, have climbed by 1,400% since Election Day.
What is going on here? It would appear that people are expecting an economic boom in the USA. We recently asked how the market would respond to a Trump victory.
Trump is essentially proposing another round of supply side economics in which taxes are cut, especially for the wealthy, with the intent that subsequent investment generates more jobs and wealth.
There is talk that he will also cut a deal to reduce taxes on money repatriated from offshore accounts by US corporations. Why shipping stocks are up is because traders believe that tax cuts, repatriated money and infrastructure spending will drive the American economy higher. That means more imported raw materials and, perhaps, more sales overseas. That latter part, however, is problematic. Supply side programs often lead to inflation and we questioned if how the market would respond to inflation.