The Dow Jones Transportation Average, which has lagged behind major US stock indices for years, has recently outperformed the S&P 500 by 13 percentage points over the past month and a half, nearing its largest gain since the financial crisis. The index, which includes industry giants such as CSX Corp (CSX.US), FedEx (FDX.US), Old Dominion Freight Lines (ODFL.US), and United Airlines (UAL.US), has surged due to robust economic data and a trend of reducing holdings in major tech companies. The demand for diversified investments among US stock investors has increased the appeal of "traditional economy" sectors.

Previously, concerns about the potentially disruptive impact of artificial intelligence, coupled with massive capital expenditure plans by hyperscale data center operators for the technology, prompted investors to shift funds away from the tech sector towards other areas. Manufacturing data has further reinforced this trend, providing optimistic signals for investors seeking safer investments. Following last week's Institute for Supply Management report showing US manufacturing activity expanded at its fastest pace since January 2022, the transportation index reached a new record high. On Wednesday, the index edged higher after stronger-than-expected non-farm payroll data indicated stabilization in the labor market.

Sameer Samana, Global Head of Equity and Real Assets at Wells Fargo Investment Institute, stated, "This sector is most sensitive to economic conditions because higher levels of economic activity mean goods need to circulate domestically and globally." As investors seek alternatives to AI-related stocks, the strong economic situation "further reinforces the positive investment thesis." The transportation industry is considered "AI-resistant," with investors increasingly favoring acquisitions of companies whose core functions cannot be replicated by AI technology.

Nationwide's Chief Market Strategist Mark Hackett explained that recent data has provided additional boosts to transportation stocks in several aspects. He noted, "It's obvious that if manufacturing demand increases, then transportation demand must also increase." This also signals an overall improvement in the economy, serving as a key technical indicator for investors to buy stocks that benefit first from economic recovery.

However, some warn that future gains may be limited, at least for some companies. Citigroup analyst Ariel Rosa downgraded four trucking companies, including Old Dominion Freight Lines, following the ISM data release. Rosa wrote in a client note that improvements in the economic environment for these companies are "largely reflected in stock prices." Last week, Greg Swenson of Leuthold Group described the airline, railroad, and freight industries as a "mixed bag," though he expressed greater optimism about the prospects for air freight and logistics.

Christopher Kuhn, a Benchmark analyst tracking trucking stocks, pointed out that the ISM Services PMI has only expanded for one month, but trucking companies would benefit quickly if demand recovers. He believes there is still upside potential in the trucking sector. Kuhn stated, "With just a little revenue growth, a little volume growth, and a little price increase, you can see significant incremental profits flowing to the bottom line."