Doug Goodwille from Kayne Anderson speaks to Drew Meredith from The Inside Network on market thinkers.
While a surging gold price is on hold as the world adjusts to a Trump presidency, all the factors that saw its price rise more than 50 per during his first term in office – trade disputes, fiscal deficits and geopolitical tensions – are almost certainly guaranteed the second time around.
It’s time to load up on airline and travel stocks
As Australia rolls up its sleeves for a Covid-19 jab, the number of people who have received at least one vaccination in Australia pushes past 54.4% (11.2m). The number of people fully vaccinated has quietly climbed past 31.6%. This takes Australia’s total vaccination progress to 24.29%, placing us just below Sri Lanka, which has a similar-sized population, with 26.46% vaccinated.
On the bright side, we aren’t last, but we may as well be. Suffice to say, if you haven’t figured it out by now, “vaccination” is your ticket to freedom. Unfortunately, lockdowns and masks simply won’t cut it anymore. For one, lockdowns aren’t cheap. According to AMP Capital chief economist Shane Oliver, lockdowns will shave the September quarter GDP figure by 2.5 percentage points. That would be about $17 billion in lost economic activity. Breaking it down, lockdowns cost $3.2 billion a week, or $19.1 million an hour. But more importantly, lockdowns aren’t so effective with the more virulent Delta variant.
In Australia, we’re relying purely on the vaccine to provide herd immunity, with the magic figure sitting around 70% of Australia’s population vaccinated. If the Sydney Morning Herald is right, at this pace the Transition phase (>70%) will be met around late October 2021, and the Consolidation phase (>80%) around mid November 2021. Perhaps that’s a little too optimistic.
Moving on from vaccines… What does the share market think? Keep in mind, share prices usually reflect future earnings growth which looks out about six months ahead. Where will the world be six months from now? Strangely enough, travel and airline stocks collectively rebounded from their COVID lows on no news or earnings reports.
| ASX | Company | 1 week | 1 month | 1 year |
| FLT | Flight Centre | 15.79% | 9.73% | 23.02% |
| WEB | Webjet | 13.59% | 13.82% | 50.54% |
| CTD | Corporate Travel | 9.26% | 7.88% | 56.31% |
| QAN | Qantas | 10.18% | 7.03% | 26.82% |
| AIZ | Air New Zealand | 7.27% | 3.15% | 14.34% |
| HLO | Hello World | 9.68% | 4.94% | -15.84% |
Is it time to buy travel and tourism stocks? Looking at the table above, it’s clear that travel stocks have started to run following promising vaccine news. The market seems to be looking past the pandemic, with borders reopening and international flights remaining on hold. Many Australians who love to travel but have been stuck at home for the last two years, will be dying to get away. Just take a look at Qantas’ tear-jerking new ad.
Travel and tourism was the first industry to be really hit hard. So much so, that Virgin Airways went into receivership. As tourism was the first sector to be hit… it will be the last to recover, as it’s affected by the pandemic more than any other industry.
The good news is the recovery in tourism and travel stocks looks to be underway.
