FINANCIAL EDGE, RAILWAY AGE DECEMBER 2025 ISSUE: The holidays always bring the classic tussle between Ebeneezer Scrooge (pre-ghosts) and Santa. In the holiday spirit, Santa (or the true spirit of the holidays) always wins out. (Don’t agree? Name a Holiday movie without a happy ending.) Unfortunately, in the non-cinematic world, reality often gets in the way.
The Federal Reserve Board of Governors is set to have the Federal Open Market Committee meeting on Dec. 10. The markets are atwitter (yes it was a word before the social media) about what the Fed may or may not do. Will it be a holiday joy or holiday horror?
The members of the Board seem split, and this is reflected in the market’s probability estimates of a cut moving from 90% to 40% to 75% over a few weeks. (Those of you reading this after Dec. 10 may already know the answer.) It’s a tough job in the moment as the economy fritters between growth, inflation and stagnancy. The choice by the Fed will certainly leave some constituency unhappy.
Generally, the industrial economy is bearing the brunt of a kind of weakness that has led to a great amount of uncertainty about 2026 and its prospects. Strip the rail economy of the low volume cha-cha-cha being played 24/7 as the industry waits for Union Pacific to file its STB application for the acquisition of Norfolk Southern, and there’s not much to be dancing about.
Recent conversations with supply chain professionals across several industrial commodity shippers suggests that many do not see a rebound until late 2026 (best case) or more likely 2027.
The numbers and fact pattern are bearing this out. With new railcar orders for 3Q25 languishing at just over 3,000 cars, it’s difficult to feel anything remotely bullish.
Jason Miller, the Eli Broad Professor in Supply Chain Management at Michigan State University, recently noted in a LinkedIn post about Home Depot’s earnings that the mix of three bold factors—a significant slowdown in YOY sales, a slower pace of inventory turnover and a decrease in gross margins—indicates underlying market weakness and tariff related malaise. Furthermore, Home Depot offered no guidance for when demand may begin to accelerate.
Miller also points out recent downward revisions by the Federal Reserve to the index of Industrial Production that lowered August 2025’s numbers to levels not seen since February 2020. The IP numbers posted by the Fed reflect both industrial output and prices.
Need more holiday cheer? The Journal of Commerce reports that western borne shipping capacity from Europe is at peak volumes, the import slump from Asia due to earlier-in-the-year frontloading continues, and truck carriers are shrinking inventory of available (over) capacity to maintain pricing at today’s already low levels.
It is difficult to anticipate tariff clarity in the next six to nine months. If the Supreme Court rejects the current tariffs, expect 80% of them to be rerouted through other channels and be reinstated. Expect a 2026 push into the reshaping of USMCA with a possible scrapping and redrafting of the entire agreement still on the table. That will lead to continued uncertainty and trepidation about investment.
The news is pretty grim, which from an outsider’s perspective does not lend credence to the railroad mega-merger as creating opportunities for growth. It continues to feel like a consolidation of earnings power without growth (cha-cha-cha). As Paul Denton, retired President and CEO of the Maryland Midland Railway, noted in his recent Railway Age opinion piece, “Fancy wording and expensive lawyer briefs dangled in front of the STB are window dressing. Ask any short line CEO or former rail shipper about ‘benefits’ from any prior rail merger.”
As the carol goes, maybe we just “need a little Christmas now” from the Federal Reserve. The consumer has propped the economy for some time now, and while the wealth gap mixed with stock market growth continues to support affluent spending, no amount of commodity fetishism can fill the gaps in the industrial economy. Consumers are pivoting to discount retailers and buying on early bargains. Anticipated holiday shopping growth YOY is expected to peak at 2%.
Even with its trepidations about the state of the labor market and the higher-than-targeted inflation, the Fed will likely hear the caroling in the hallways and give the gift that they hope will keep on giving: “Yes we need a little discount, need a little step down, we need a little rate cut now,” and provide the juice the economy seems to need. Onward to a better 2026.
Happy Holidays to you and your families and best wishes for a healthy and successful 2026.
Got questions? Set them free at dnahass@railfin.com.
