Go deeper in Last-Mile Package Delivery: ETF Performance as a proxy.

The package delivery industry is undergoing significant transformations driven by evolving consumer preferences and market dynamics. According to a report by 摩根士丹利 , there's a notable shift towards next-day or same-day delivery services, reflecting consumers' growing reliance on e-commerce and their desire for faster order fulfillment.

Retailers are adapting to this trend by moving their inventory closer to consumers, resulting in shorter delivery routes that are more efficiently covered by ground transportation. This shift towards last-mile deliveries poses challenges for established parcel delivery companies, potentially impacting their profitability as they navigate the complexities of adjusting their operations to meet evolving consumer demands.

One of the key drivers behind this transformation is the rise of online retailing, which has revolutionized the way consumers shop. The convenience of being able to click, pay, and receive packages the next day has become increasingly appealing to consumers. As a result, retailers, regional distributors, and low-cost air freight carriers are presented with new opportunities to capitalize on the growing demand for fast and efficient delivery services.

In response to these changes, major parcel companies are facing pressure to pivot towards less-profitable last-mile routes, which could have long-term implications for their margins. This transition may take several years to fully implement, as companies grapple with the need to realign their infrastructure and adapt to new market realities.

The U.S. Postal Service is also undergoing a transformation to modernize its operations and remain competitive in the evolving landscape of package delivery. By regionalizing its operations and reducing costs, the USPS aims to attract more retailers interested in long-term contracts for next-day deliveries, further intensifying competition in the market.

Investors are closely monitoring these developments, particularly in the context of exchange-traded funds (ETFs) that track companies operating in the transportation and logistics sectors.

Let's take a closer look (data and numbers) at how the performance of four ETFs - CLIX, FTXR, IYT, and XTN - aligns with the trends outlined in the Morgan Stanley report.

1.?????? CLIX (ProShares Long Online/Short Stores ETF): CLIX focuses on companies involved in online retailing and traditional brick-and-mortar stores. The decline in CLIX's performance from 2021 to early 2023 reflects the challenges faced by companies specializing in last-mile delivery services. As retailers prioritize faster order fulfillment, the shift towards shorter delivery routes and the need to adapt to changing consumer preferences could have been impacted CLIX's performance.

2.?????? FTXR (First Trust Nasdaq Transportation ETF): FTXR tracks companies involved in transportation technologies, including autonomous vehicles and electric vehicles. While the performance of FTXR has remained relatively stable, the ETF may present growth opportunities as transportation sectors evolve to meet new demands. Innovations in transportation technologies could position FTXR to benefit from industry disruptions.

3.?????? IYT (iShares Transportation Average ETF): IYT represents a broad range of transportation and logistics companies, including airlines, railroads, and trucking companies. Despite industry transformations, the stability in IYT's performance suggests resilience to disruptions affecting last-mile delivery services. The diversified nature of IYT's portfolio may mitigate the impact of challenges faced by specific segments of the transportation industry.

4.?????? XTN (SPDR S&P Transportation ETF): XTN includes companies involved in air transportation, shipping, and logistics services. Similar to FTXR and IYT, XTN's performance has been relatively stable amidst industry transformations. The ETF's exposure to various segments of the transportation industry provides investors with diversification benefits and may offer stability in volatile market conditions.

Long-Term Perspective: A Deeper Dive into ETF Performance

When we extend our analysis to the last 6 years, a more nuanced picture emerges, shedding light on the long-term performance trends of the ETFs. In particular, we observe significant growth in the ETFs IYT and XTN, accompanied by a decline in the performance of CLIX following the pandemic-induced surge, which was both logical and cyclical in nature.

1.?????? IYT (iShares Transportation Average ETF):

Over the past 6 years, IYT has demonstrated steady growth, reflecting the resilience of the transportation and logistics sector. Despite fluctuations in market conditions, IYT has consistently delivered positive returns, buoyed by the enduring demand for transportation services.

2.?????? XTN (SPDR S&P Transportation ETF):

Similar to IYT, XTN has experienced notable growth over the long term, driven by the sustained expansion of the transportation industry. The ETF's exposure to various segments of the transportation sector has positioned it to capitalize on broader market trends, contributing to its overall performance.

3.?????? CLIX (ProShares Long Online/Short Stores ETF):

While CLIX saw a surge in performance during the initial stages of the pandemic, driven by increased reliance on e-commerce and online retailing, its long-term trajectory has been less favorable. Post-pandemic, CLIX experienced a decline in performance, reflecting both the normalization of consumer behavior and the challenges faced by companies specializing in last-mile delivery services.

In essence, a longer-term perspective provides valuable insights into the underlying trends shaping the performance of these ETFs. While short-term fluctuations may capture transient market dynamics, analyzing performance over a longer horizon offers a more comprehensive understanding of the forces driving ETF returns and the evolving landscape of the transportation and logistics industry.

What happen with anomalies?

• IYT (Transportation): 5 groups were observed, all concentrated between September 21 and October 14, 2022. The dates with the highest anomalies were September 23 (46.15918) and September 27 (46.28349).
• XTN (Transportation): 4 groups of anomalies were identified, also concentrated in the same period as IYT. The dates with the highest anomalies were September 23 (63.73229) and September 26 (62.78356).
• FTXR (Transportation): 5 groups of anomalies were observed, with a similar pattern to the previous ETFs. The dates with the highest anomalies were September 23 (23.47181) and September 26 (23.18936).
• CLIX (E-commerce): 5 groups of anomalies were identified, with the same time pattern as the other ETFs. The dates with the highest anomalies were September 23 (33.06530) and September 26 (33.17886).

Discussion:

The anomalies observed in Transportation and E-commerce ETFs during November and December 2022 coincide with a period of volatility in the financial markets. They can be attributed to various factors, such as global economic uncertainty, geopolitical tensions, and restrictive monetary policies. All exogenous factors to the determining variables of the sectors.

Conclusion:

At the end of the day, in both the short and long term, the analysis of ETF performance provides valuable insights into the dynamics of the package delivery industry. In the short term, we observe fluctuations in ETF performance reflecting immediate market reactions to changing consumer behaviors and industry trends. For example, the decline in CLIX's performance post-pandemic highlights the challenges faced by companies specializing in last-mile delivery services, while the stability of ETFs like FTXR, IYT, and XTN underscores their resilience amidst industry transformations.

Conversely, taking a longer-term perspective reveals more nuanced trends and patterns. Over the past six years, ETFs such as IYT and XTN have demonstrated steady growth, reflecting the enduring demand for transportation and logistics services. This long-term trajectory suggests a sustained expansion of the transportation industry, driven by broader market trends and evolving consumer preferences.

Note: It is important to note that this analysis is based on historical data and is not intended as a prediction of the future. It is recommended to perform a more thorough analysis considering other relevant economic indicators and factors before making investment decisions.