Editor’s Note: The author of this article, Dr. Joe Duarte, has been a professional investor and independent analyst since 1990. He is a former registered investment advisor and author of the bestselling Options Trading for Dummies, and several other books including Market Timing for Dummies and Successful Biotech Investing. He’s also a medical doctor. After a hiatus, Dr. Duarte has returned to the Investing Daily team.

Two concepts work hand in hand: chaos, the scientific theory whereby unpredictability is the only predictable reality, and complexity, the process through which adaptation leads to evolution.

Specifically, whereby chaos is about the unpredictable outcomes that develop when a butterfly flaps its wings in a remote area and seemingly unrelated events happen in far way places, complexity is the process through which systems adapt to the events caused by chaos.

Interestingly, as systems evolve, what was once the unthinkable often becomes the norm, or as economists are prone to say, the temporary becomes structural or permanent.

And there is no system that is more complex or has more butterflies flapping its wings at any one time than the global economy with its infinite moving parts interacting with one another and with the environment. It makes sense that when you add something purely chaotic into the mix, such as the COVID pandemic, the adaptive processes that are sure to follow will also likely be dramatic.

The bullets below summarizes the major actions caused by the COVID pandemic and the related adaptations/reactions in the economy.

• Temporary economic collapse from shutdowns in early pandemic period led to vast unemployment.
• Massive quantitative easing (QE) from the Federal Reserve pumped liquidity into the system.
• Uneven economic and employment recovery led to increasing government assistance programs.
• Continuing uncertainty about the pandemic combined with a reduced number of workers returning to workforce has perpetuated economic volatility in the face of rising demand for goods and services.

The bottom line is that the presence of high levels of liquidity in the system, in the face of rising demand for goods and services and supply chain constraints, is the classic definition for inflation: too many dollars chasing too few goods.

Supply Chains and Consequences

With port bottlenecks, factories operating at less than 100% capacity, and an unsteady and unpredictable employment environment, you can assume that the supply chain issues won’t evaporate anytime soon. Moreover, if there is another serious wave of COVID as cold weather asserts itself, then any and all predictions may be moot.

Of course, even in the current environment, you can bet that stock traders will put their money where they see the most potential for profit. And one thing they’ve done lately is to buy transportation stocks.

What’s The Stock Market Thinking?

A quick way to gauge the stock market’s expectations is to take a look at the SPDR S&P Transportation ETF (XTN) where trucking, railway, and other transportation stocks trade as a unit.

Specifically, the transports have already had a big run and are now consolidating. Of course, this includes railroads such as CSX Corp. (NYSE: CSX), which has done fairly well and airlines such as Southwest (NYSE: LUV), which has not profited from the current situation.

So where do investors go in this area of the market?

Indeed, the most interesting transport subsector has been trucking, where companies such as SAIA (NSDQ: SAIA) have been making significant gains of late.

What makes SAIA most interesting is that it focuses on “less than truckload” services, which means that it could be a bit more flexible in what it can offer customers. Of course, this is not a recommendation to buy, sell or hold, SAIA, given that the stock has had quite a run already. Other trucking stocks are available at more attractive valuations.

Read This Story: FleetCor: King of the Road

My point is that as the economic situation evolves, investors will have to dig deeper into an individual company’s business as well as how it’s coping with the current environment. Moreover, it’s also imperative to understand what the company’s boots-on-the-ground assessment of the situation is as it may help when making decisions about other areas of investing or personal finances.

For example, SAIA noted the following in its Q3 earnings call:

• Mixed success with new employees, which means it’s finding workers but there are challenges.
• It’s able to raise prices, with a 24.8 % increase on average per shipment including fuel surcharges.
• Rising tonnage per shipment, reflecting ncreased customer demand.
• Rising fuel expense by nearly 50%.
• Rising insurance expenses.

Just How “Sticky” Is Rising Inflation?

The bottom line is that even though SAIA is making money, it’s having to work pretty hard to do so.

That’s because we’re living through a period of significant inflationary pressure brought on by the pandemic, the response from central banks (money printing) and the consequences of the entire and highly complex situation, including unemployment and the rising costs of rehiring and retaining workers.

While these challenges are being experienced by businesses across the board, trucking companies are managing, despite significant challenges, to profit. This is most visible in the ability of companies like SAIA to raise prices to offset their increasing costs of doing business.

Unless something gives soon, this situation is likely to remain in place for the foreseeable future because the longer it lasts, the odds increase of it becoming structural.

Maybe you’re looking for profitable investments that are immune to the risks that I’ve just described. That’s where my colleague Jim Fink comes in.

As chief investment strategist of Velocity Trader, Jim Fink has devised trading methodologies that reap market-beating gains, regardless of economic cycles or the rate of inflation.

Jim has put together a new presentation that shows smart investors how to make massive investment gains in a short amount of time. Click here now for access.