June so far has been a brutal month for shipping stocks. In June, many shipping equities are down 2.5% to 8.0%. We saw a few negative spot rate moves, but those can be explained by normal seasonality. Depending on the market, we have even witnessed counter seasonal strength. In many of the shipping sectors the fundamentals remain strong.
The declines may have been driven by talk of a potential Gaza cease-fire deal announced by Joe Biden in early June that later failed. Shipping stocks fell on mass, penetrating key support levels, consequently bringing in the algos and technical traders who look to short stocks on such moves. We know short term investors trade on headlines, and it is tempting to buy and sell with them. Indeed, the sinking of the Tutor dry-bulk carrier by an unmanned Houthi small boat packed with explosives in the Bab el-Mandeb on Wednesday provided a tail wind to shipping stocks on June 20th.
Despite a tough June, we would note that shipping stocks for the most part have massively outperformed compared to broad US and International stocks indices year to date. As of June 21st, year-to-date tanker stocks were up 34.7%, dry bulk 32.4%, containers and liners 57.4%, gas carriers 16.1%, and industrial and other shipping 39.8%. Over the same period, the S&P 500 is up 15.36%, while the broader indices, the S&P 500 Equal Weight Index and MSCI World Ex US are up 5.48 and 2.79% respectively and the Russell 2000 is down .25%. Corrections are part and parcel of the market. As long-term investors, we don’t worry about sentiment as much as we do congestion, ton miles and the order book. We doff our cap to those that are able to trade short term. On the other hand, the largest returns to shipping investors have accrued to those who bought in 2021, 2022 and 2023 and held. When there is a lot of noise day to day, it is important to remember this.
