The Thanksgiving week is historically a bullish feast for the U.S. stock market even with low volumes and a holiday-shortened week. Although Americans are expected to spend less this year with expensive holiday meals, U.S. stocks should get a boost from upbeat traveling.
The S&P 500 and the tech-heavy Nasdaq Index have been hitting record highs ahead of the Thanksgiving week on earnings optimism despite concerns over further increases in price pressure and uncertainty over the Fed's tapering plans (read: 5 Growth ETFs to Tap on an Incredible S&P 500 Rally).
Based on the history and strong holiday travel trends, investors could binge on five ETFs such as Invesco Dynamic Food & Beverage ETF PBJ, U.S. Global Jets ETF JETS, iShares Dow Jones Transportation Average Fund IYT, ALPS Global Travel Beneficiaries ETF JRNY and SonicShares Airlines, Hotels, Cruise Lines ETF TRYP.
Thanksgiving Week Bulls Are Here!
According to Bespoke Investment Group, Thanksgiving week has returned modest gains for stocks dating back to 1945. The researchers say that since that point, the entire week of Thanksgiving has averaged a 60-basis-point advance for the S&P 500, with the best returns coming on Wednesday before the holiday and Black Friday, and the only decline on average on Monday at the start of the week.
Sam Stovall, chief investment strategist at CFRA, also said the last five trading days of November have been traditionally positive since 1950. There is a two-third likelihood that the market is up the day before Thanksgiving, a 57% likelihood for an increase the day after Thanksgiving, and a 71% likelihood that it’s up on Monday.
Consumer confidence is stronger than expected, hiring has been picking up and wages are rising. While inflation is rising at the fastest pace in 30 years, retail sales remain robust. U.S. retail sales in October surged for the third consecutive months and jumped the maximum since March. Americans started to shop early to avoid the shortage of goods due to the ongoing pandemic. A wider reach of vaccinations has also accelerated economic reopening and encouraged the traveling.
Weak Spending and Higher Costs
A report from LendingTree showed that Americans will spend $391.60, down 18% from 2020. About 47% of Americans plan to host Thanksgiving dinner this year – the highest percentage in three years. Inflation and supply chain interruptions have made holiday meal expensive this year, according to the American Farm Bureau Federation's annual Thanksgiving dinner cost survey. The average cost of serving 10 people for Thanksgiving is expected to be $53.31 (or more than $5.00 per person), up 14% from the last year and priciest meal in the survey's 36 years.
According to travel service provider American Automobile Association (AAA), Thanksgiving holiday travel is expected to rebound nearly to pre-pandemic levels. More than 53.4 million Americans will travel this Thanksgiving weekend (Nov 24-Nov 28), up 13% from last year and the highest single-year increase since 2005. Of them, 48.3 million (up 8% from the last year) will go on road trips, 4.2 million (up 80%) will fly, and the remaining 1 million (up 262%) will travel by train, bus or cruise. With the lifting of pandemic restrictions and increasing consumer confidence, travelers remain upbeat when making their travel plans this holiday season (read: Rally in Travel and Tourism ETFs Set to Continue).
Notably, a report from the U.S. airlines group, Airlines for America (A4A), shows that 28.5 million passengers will travel during the 12-day Thanksgiving air-travel period, up 3% from 2016. The 2.38 million passengers per day expected to take to the skies represent an increase of 69,000 from the 2016 Thanksgiving travel period. Airlines are accommodating this increase in demand by adding 86,000 more seats in the marketplace each day, up 3.2% over 2016.
According to the Transportation Security Administration, about 2 million people a day are projected to fly from Nov 19 through Nov 28, with the potential for some days to exceed that average dramatically. Passenger traffic for the last five days of the period would be just 9% below 2019, before the pandemic hit.
ETFs to Shower Gains
Invesco Dynamic Food & Beverage ETF PBJ
Invesco Dynamic Food & Beverage ETF offers exposure to 31 stocks that are engaged in the manufacture, sale or distribution of food and beverage products, agricultural products and products related to the development of new food technologies by tracking the Dynamic Food & Beverage Intellidex Index.
With AUM of $100.7 million, Invesco Dynamic Food & Beverage ETF charges 63 bps in annual fees from investors and sees a light average daily volume of 15,000 shares. PBJ has a Zacks ETF Rank #2 (Buy) with a Medium risk outlook (read:Buy 5 High-Beta ETFs That Still Offer Value).
U.S. Global Jets ETF JETS
U.S. Global Jets ETF provides exposure to the global airline industry, including airline operators and manufacturers from all over the world by tracking the U.S. Global Jets Index. The product holds 51 securities and charges 60 bps in annual fees.
U.S. Global Jets ETF has gathered $7.1 billion in its asset base while sees a heavy trading volume of nearly 7.1 million shares a day. JETS has a Zacks ETF Rank #3 (Hold) with a High risk outlook.
iShares Dow Jones Transportation Average Fund IYT
iShares Dow Jones Transportation Average Fund follows the Dow Jones Transportation Average Index and offers exposure to the broad transportation sector. The fund holds a small basket of 48 stocks with railroads, air freight & logistics, trucking and airlines taking the top four spots.
iShares Dow Jones Transportation Average Fund has accumulated $1.8 billion in its asset base while seeing a good trading volume of around 165,000 shares a day. IYT charges 41 bps in annual fees and has a Zacks ETF Rank #2 with a High risk outlook (read: Transport ETFs Riding High Post Q3 Earnings).
ALPS Global Travel Beneficiaries ETF JRNY
ALPS Global Travel Beneficiaries ETF, which was launched on Sep 7, provides diversified exposure to the global travel industry by tracking the S-Network Global Travel Index. The fund invests in 76 companies engaged in booking and rental agencies, airlines and airport services, hotels, casinos, and cruise lines, along with travel-related companies identified through machine learning algorithms, such as luxury retail, entertainment, leisure, food and beverage, and payment processing vendors.
ALPS Global Travel Beneficiaries ETF has accumulated $8.4 million in its asset base and charges 65 bps in annual fees. JRNY trades in an average daily volume of 3,000 shares.
SonicShares Airlines, Hotels, Cruise Lines ETF TRYP
SonicShares Airlines, Hotels, Cruise Lines ETF provides exposure to a global portfolio of companies that are focused on what many investors consider to be the “core” of business and leisure travel: the airline, hotel and cruise line industries. It tracks the Solactive Airlines, Hotels, Cruise Lines Index, holding 60 stocks in its basket.
SonicShares Airlines, Hotels, Cruise Lines ETF was launched in the space in May and has accumulated $7.6 million in its asset base so far. TRYP trades in an average daily volume of 48,000 shares and charges 75 bps in annual fees.
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iShares U.S. Transportation ETF (IYT): ETF Research Reports
U.S. Global Jets ETF (JETS): ETF Research Reports
Invesco Dynamic Food & Beverage ETF (PBJ): ETF Research Reports
SonicShares Airlines, Hotels, Cruise Lines ETF (TRYP): ETF Research Reports
ALPS Global Travel Beneficiaries ETF (JRNY): ETF Research Reports
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.