Editor’s note: Any and all references to time frames longer than one trading day are for purposes of market context only, and not recommendations of any holding time frame. Daily rebalancing ETFs are not meant to be held unmonitored for long periods. If you don’t have the resources, time or inclination to constantly monitor and manage your positions, leveraged and inverse ETFs are not for you.
Summer may not have officially kicked off yet but that hasn’t stopped Americans from travelling like the season has already arrived. Case in point: The Thursday before Memorial Day saw U.S. airports experience their second-busiest day in history. The roads were packed as well—AAA figured that around 38.4 million people planned to take road trips over the long weekend (CNN).
If this level of activity is a harbinger for the summer itself, the travel industry looks set to have a bumper season. From cruise lines to hotels to booking websites, more travel equals more revenue. Backing the idea of a strong travel season is an analysis from Bank of America Institute. The bank’s card data reveals promising trends for the next few months, and its consumer study suggests 72% of people will end up travelling, with 36% saying a trip has already been planned (CNN).
And at a time when the market only seems to care about artificial intelligence (AI), might travel stocks be set to heat up in coming weeks?
The sector has lagged the broader market lately. In fact, as the following chart shows, the BlueStar® Travel and Vacation Index* peaked at the start of April and has subsequently pulled back over 7%. This Index is comprised of U.S.-listed companies involved in the travel and leisure sector.
Source: www.marketvector.com, June 5, 2024.
The performance data quoted represents past performance. Past performance does not guarantee future results.
Royal Caribbean Has Cruised to New Highs
Even though travel stocks have lagged the market in the last two months, they’re firmly in the green for the year—a sign, perhaps, that the U.S. consumer’s staying power has been underestimated.
For example, how bad can the economy be if Royal Caribbean (Ticker: RCL), which accounts for nearly 4% of the BlueStar® Travel and Vacation Index, is at a record high? Traders should keep an eye on the company’s second quarter earnings, set to be released on July 25. The giant cruise line broke out to a new all-time high on June 4, eclipsing its pre-COVID peak.
RCL earned $1.77 a share in the first quarter, blowing away analyst expectations for $1.33. The cruise line isn’t just benefitting from a healthy overall travel sector—it launched Icon of the Seas this year, the largest passenger ship in the world (20 decks, carrying well over 5,000 passengers).
Hilton Might Have Staying Power
Anyone who’s travelling needs a place to stay which is great news for hotel chains like Hilton Worldwide Holdings Inc. (Ticker: HLT). The company will release its second quarter earnings on July 24. As with RCL, HLT beat forecasts for the first quarter, reporting $1.53 a share vs. the consensus of $1.41. If the hotel giant makes it two beats in a row, travel shares may get a lift. Hilton represents 5.5% of the Index.
Macro Data Could Sway Travel Equities
While company results are important the impact of economic data on travel stocks can’t be ignored. In this regard, traders should monitor May’s retail sales report on June 18 to see if the consumer is hanging in there. April’s print came in flat month. Travel sector bulls will be crossing their fingers for a strong May number.
Bullish on Travel? Here’s How to Play It
Traders itching to turbocharge any gains in travel shares can access the Direxion Daily Travel & Vacation Bull 2X Shares (Ticker: OOTO). This leveraged ETF seeks daily results, before fees and expenses, equal to 200% of the performance of the BlueStar® Travel and Vacation Index.
Originally published 10 June 2024.
For more news, information, and strategy, visit the Leveraged & Inverse Channel.
To view the Fund’s full holdings, click here. Holdings are subject to risk and change.
*Definitions and Index Descriptions
An investor should carefully consider the Fund’s investment objective, risks, charges, and expenses before investing. The Fund’s prospectus and summary prospectus contain this and other information about the Direxion Shares. To obtain the Fund’s prospectus and summary prospectus call 866-476-7523 or visit our website at direxion.com. The Fund’s prospectus and summary prospectus should be read carefully before investing.
Leveraged and Inverse ETFs pursue daily leveraged investment objectives which means they are riskier than alternatives which do not use leverage. They seek daily goals and should not be expected to track the underlying index over periods longer than one day. They are not suitable for all investors and should be utilized only by sophisticated investors who understand leverage risk and who actively manage their investments.
The BlueStar® Travel and Vacation Index (BTOURNTR) is provided by MV Index Solutions GmbH and is comprised of US-listed stocks, including depository receipts, of companies that are “Travel and Vacation” companies, as defined by the Index Provider.
One cannot invest directly in an index.
Direxion Shares Risks – An investment in the Fund involves risk, including the possible loss of principal. The Fund is non-diversified and include risks associated with the Fund’s concentrating its investments in a particular industry, sector, or geography which can increase volatility. The use of derivatives such as futures contracts and swaps are subject to market risks that may cause their price to fluctuate over time. Risks of the Fund include Effects of Compounding and Market Volatility Risk, Leverage Risk, Market Risk, Counterparty Risk, Rebalancing Risk, Intra-Day Investment Risk, Daily Index Correlation Risk, Other Investment Companies (including ETFs) Risk, Cash Transaction Risk, Passive Investment and Index Performance Risk, and risks specific to the consumer discretionary and industrials sectors and the airline and travel and vacation industries. Securities of companies in the travel and vacation industry may become obsolete quickly and may be significantly impacted by the performance of the overall economy, changing consumer tastes and demands, consumer discretionary income levels, intense competition, technological developments, and government regulation. Please see the summary and full prospectus for a more complete description of these and other risks of the Fund.
Distributor: Foreside Fund Services, LLC.
