Peak freight volumes appear to be in, as contracted truckload volumes crested on Monday and subsequently declined (the first time in a month they had done so). As jobless claims mount and unemployment rises, consumer spending will retreat from big-ticket items first, making its way down, finally, to the consumer packaged goods products that households have already stocked.

Food and beverage, pharmaceuticals and medical supplies, and consumer packaged goods will be transportation and logistics companies’ most defensive books of business. Large swaths of the economy — ranging from automotive, appliances, furniture and electronics to apparel, building materials, etc. — are shutting down, which will cut off volumes abruptly.

Our base case is that the most severe movement and work restrictions will likely be in place for two months (based on China’s Hubei province policy). The uncoordinated and piecemeal release of movement restrictions by geography and company, slowly recovering consumer confidence, balance sheet rebuilding, and worries about a seasonal virus resurgence may lead to a u-shaped recovery rather than a v-shaped recovery. This implies an extended trough for freight volumes of most commodity types, except for food and beverage, some consumer staples, and the raw materials (paper, plastic, chemicals, grains, etc.) required for their manufacture.

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