From the Editor: Stasis, possibility and the now/next balancing act

Six months into this year of uncertainty squared, most business leaders are staying their respective strategic courses, according to the results of survey released June 25 by financial services giant J.P. Morgan. While the survey showed “a noteworthy decline in economic optimism among U.S. middle market executives,” it also indicated “confidence in business performance remains strong,” with 58% of executives still optimistic about their own companies’ near-term fortunes. More than 70% of the respondents expect revenue, sales and profits to increase or remain the same this year, the survey revealed.

“This resilience underscores business leaders’ determination to navigate challenges and pursue growth opportunities even in uncertain times,” J.P. Morgan officials wrote in the survey’s executive summary.

Few business leaders I know would refute the determination bit, or the pursuit-of-growth-despite-the-uncertainty thing — particularly strategists in the Class I rail realm, where balancing now and next and making decisions accordingly has always been standard operating procedure.

While major freight railroads haven’t offered much detail about the impact of all the uncertainty to date, it’s not a stretch to imagine that some have made strategic tweaks. Businesses in other industry segments certainly have.

While 21% of the J.P. Morgan survey respondents said they planned to maintain their 2025 strategic plan timelines, and 40% planned to maintain them without making any changes, 23% said they were “delaying strategic plans into 2026,” J.P. Morgan officials said. And 14% said they were “accelerating their plans” as they adapt to the challenging economic landscape.

Fueling the uncertainty fire

Intermodal certainly qualifies as “challenging” in the current landscape — challenging to pinpoint in terms of impact on the rails, if nothing else. While North American railroads are “stable and offering good service,” they haven’t been unscathed by tariffs and trade wars, as independent transportation analyst Tony Hatch noted in a June 20 webcast presented by Progressive Railroading’s RailTrends conference.

“The rails’ trade weight is significantly more than the 38% the AAR talks about, or the 25% CSX uses for their trade weight — those numbers exclude Canada and Mexico,” as well as transload containers and secondary impacts, said Hatch, who serves as program consultant for RailTrends, which will be held Nov. 20-21 in New York City.

Also difficult to measure is the impact of “the uncertain goals of the [Trump] administration” regarding tariffs et. al, Hatch said.

“Rails are a derived demand business — they can’t just create something,” he said. “Uncertainty breeds stasis.”

It also breeds possibility. Chatter in recent weeks about transcontinental merger(s) has added hypothetical fuel to the uncertainty fire. Hatch, who addressed the merger topic during the June 20 webcast, believes the Big Six need to be give more time to complete their pivot to growth.

Until recently, Hatch put the probability of a transcon merger at between 0% and 5%. Given the chatter and recent arb/investor/banker calls, he’s raised it to as high as 20%.

While I don’t expect rail execs to say anything substantive about mergers in Q2 earnings conferences to be held in late July, I think they’ll provide color (maybe even a little detail) about directions and plans for the rest of 2025. Maybe they’ll offer a little balancing-act clarity. Which would be even better.