Quantitative easing has driven up the price of fuel, which can sink shipping stocks. As the chart below shows, as the price oil rises (NYSE: USO
), shipping sinks (NYSE: SEA
). However, in recent trading, shipping stocks as rallied due to quantitative easing where before they sank.
But shipping stocks are now rallying, due to the Quantitative Easing 3, recently announced by Federal Reserve Chairman Ben Bernanke. In recent market action, Diana Shipping (NYSE: DSX
) is up 4.93% for the week. For the last six months, however, Diana Shipping is down 18.38%.
Central bankers around the world announced what basically amounts to unlimited quantitative easing. As one analyst termed it, there is now "Quantitative Easing Forever." That is bullish for shippers as it shows that governments are committed to more economic growth. Even with the USO rising, so has the SEA, as a result.
What is most bullish is the $156 billion economic stimulus package announced in China. As China is the world's biggest user of steel, copper and many other commodities, that means there will be more goods be shipped. Much of that will be carried by seaborne freight.
The shipping industry is not even close to recovering from the effects of The Great Recession. But companies like Diana Shipping have proven to be survivors. Now trading around $7.24 a share, the mean analyst target price for Diana Shipping is $9 over the next year of market action.