Could the delta variant rotation from BEACH stocks to stay-at-home stocks be underway as mainstream ratches up a notch the pandemic fear-mongering? BEACH stocks represent bookings, entertainment, airlines, cruises, and hotels that got pulverized during the pandemic lockdowns.
So, the reopening of the economy in the northern hemisphere earlier this year combined with trillions of dollars of monetary easing and fiscal expansion plans triggered a euphoric stock market boom, particularly in BEACH stocks.
“Could the delta variant rotation from BEACH stocks to stay-at-home stocks be underway”
WEALTH TRAINING COMPANY
BEACH stocks could have had their day in the sun as the delta variant rotation clouds over the euphoria
A raft of recent economic indicators has turned bearish with the most recent being consumer sentiment falling to a pandemic era low. Indeed, consumer sentiment appears to have fallen off a cliff with The University of Michigan’s consumer sentiment index tumbled to 70.2 in its preliminary August reading. It was one of the largest drops in consumer sentiment on record.
So, delta variant fears, despite the mass vaccinations, combined with the ending of furlough schemes, rising job insecurity, and roughly 3.6 million people facing eviction in the next two months, according to the U.S. Census Bureau’s Household Pulse Survey and all that spells potential trouble ahead.
“The University of Michigan’s consumer sentiment index tumbled to 70.2 in its preliminary August reading”
WEALTH TRAINING COMPANY
Perhaps the delta variation rotation could be a risk -off trigger to safe-haven assets this time
Maybe stay-at-home stock will not cut it this time around.
But what is crystal clear is that investors could soon be head for the exit, regarding BEACH stocks.
The falling number of cruise ships underway is illustrated in exhibit one.
Notice that during the spring, cruise ships underway doubled from 60 to over 120 by late summer. But now a sharp reversal has been noted this week as cruise ships underway are down to 112.
“Activity at restaurants has declined by 5% since the start of August, while TSA traveler throughput and hotel activity have been roughly flat over the last few weeks” – Jan Hatzius
Perhaps cruise ships represent a short trade opportunity
This drop in the number of cruise ship sailing is not due to seasonal factors but rather media government fear-mongering over the delta variant.
The Centers for Disease Control and Prevention has updated its guidance for travelers who are at increased risk for severe illness from COVID-19 to recommend they avoid cruise ships, regardless of vaccination status
So, the expected outcome has been a rise in passenger ship cancellations which has caused cruise liners to cancel the sail.
But this raises an interesting question, are vaccinations effective?
Jan Hatzius, Goldman Sachs Chief Economist, confirmed in a note to clients this week that activity at airports, hotels, and restaurants has declined since the beginning of August.
“Activity at restaurants has declined by 5% since the start of August, while TSA traveler throughput and hotel activity have been roughly flat over the last few weeks” Hatzius said.
Hotel spending remains at 89.7% of pre-virus levels and has stalled since early summer.
So perhaps this is as good as it gets for BEACH stocks as the delta variant rotation gets underway
But will it be a full-on risk-off play?