Our Vehicle: The Pickett Line
Pickett Research’s flagship research product, The Pickett Line, launching January 2021 as a monthly publication available via paid annual subscription, provides an overview of current and expected future market conditions and a rolling forecast for national spot and contract truckload linehaul rates on a quarterly year-over-year basis for up to five years out.
With better visibility as to what is coming around the next bend in the market, decision makers can put themselves and their teams in position to plan, budget, invest, partner, and operate to achieve better long-term financial outcomes for their organizations. Why guess whether the market is heading higher or lower next year when you can follow the freight cycle and anticipate the next move with confidence? We are independent, which allows us to remain 100% objective and unbiased. As for our credibility, our subscribers will be the judge.
Our Methodology
The US Truckload Transportation Market, like many markets, can be characterized as an ongoing rebalancing between supply and demand – or in this case, the number of trucks (and drivers) to haul goods and the demand for those trucks to meet current market demand. This creates a cycle that swings from relative capacity shortage, where there is more demand relative to supply which drives market rates higher, to relative capacity surplus, where there is more supply available relative to demand which drives rates lower. The term “relative” is an important one as the simultaneous rate of change on both sides of the marketplace ultimately drives observed market rate activity.
But the simultaneous rates of change in supply and demand are rarely in a state of relative equilibrium. And it is this dynamic that creates a recurring pricing cycle observed to display at least some level of consistency and can therefore be used to predict the future – but only if you understand the past and the present.
Mastering the US Truckload Freight Market Cycle
The Pickett Research market cycle framework rests on 3 fundamental assertions:
- Spot market rates follow a relatively consistent ~3-year cycle of overshoot and collapse – from equilibrium to peak inflation to peak deflation and back to equilibrium to kick off the next cycle.
- The cycle is driven by the psychology and herd behavior of buyers and sellers over time in a very big, very fragmented market with very low barriers to entry or exit.
- So long as the market retains its fundamental structure, this cycle is likely doomed to repeat.
In other words, the US Truckload Market operates as a machine with certain mechanical properties that tend to produce similar outputs given similar inputs. The real world however is one that is governed by economic and geopolitical uncertainty, shifting technology and regulatory landscapes, and human psychology that often drives irrational behavior – so those mechanical properties and input signals can be exceedingly difficult to separate from the noise. However, with enough historical transaction data, market visibility, and insight, we propose that it absolutely can be done; the past can be used to predict the future with at least some level of directional certainty, so long as the fundamental structure of the marketplace remains intact. And that is what we endeavor to do with The Pickett Line – to offer a glimpse out into the future of US Truckload Freight Rates, using the astonishingly consistent US Truckload Freight Market Cycle to power our forecasting methodology, as a tool to help buyers, sellers, and investors make better long-term decisions for their respective stakeholders.
For a more comprehensive treatment of the Pickett Line methodology, link here https://www.henrystewartpublications.com/sites/default/files/Pickett.pdf.
Our Audience
The experience during any given period of the cycle will be very different for US Truckload Freight Market participants depending on:
(a) what side of the market they are on – Demand/Buy-side (Shipper/Broker) or Supply/Sell-side (Carrier/Broker), and
(b) their relative fleet or freight exposure to spot vs. contract market rate environments.
But for all stakeholders, when armed with better market insight to make better decisions while there is still time for them to matter, they can better position their businesses to thrive regardless of what is coming around the next bend.
Plan better. Perform better. Achieve more.
Carriers
- Optimize the timing and magnitude of capital investments in fleet and operations
- Make better fleet allocation decisions across Dedicated, Contract, and Spot opportunities
- Negotiate more favorable contract terms to offer protection over the entire duration of the agreement
- Develop more reliable profit forecasts and budgets to drive more predictable long-term cash flows
- Go to market with same long-term insight as your largest and most sophisticated competitors and trading partners
Shippers
- Develop more realistic and reliable transportation budgets to avoid late cycle surprises
- Optimize mode planning by anticipating cycle-driven challenges and opportunities across the truckload, less-than-truckload, and intermodal markets
- Improve overall truckload capacity and core carrier strategies through better portfolio rebalancing across private/dedicated, asset-based, and brokerage alternatives
- Proactively plan target exposure levels to Spot vs. Contract market dynamics over the next cycle
Freight Brokers
- Deliver more predictable financial results by proactively driving target freight portfolio exposure to Spot vs. Contract shipper commitments
- Navigate the annual bid season with confidence by more accurately projecting your cost basis over the next contract term and pricing accordingly
- Optimize forward capacity strategies across all available alternatives while there is still time to make a difference
- Inform staffing, technology, and operations planning decisions to ensure that resources are in the right place at the right time to maximize market opportunities and mitigate any downside surprises
Investors
- Leverage more accurate and reliable US Truckload Spot & Contract market rate forecasts to better evaluate current and prospective industry investment vehicles
- Improve the reliability of broader macroeconomic models and investment theses across sectors where US surface transportation cost is a material input
- Better anticipate challenges and opportunities to identify future market cycle winners and losers early enough to drive superior investment results
- Evaluate and time M&A decisions with more conviction around the future direction of market rates to deliver deals that achieve more reliable outcomes