Are Airlines About To Make A Post-Pandemic Comeback?

I think it was a great way to begin the year with the early back and forth, giving shaky folks the chance to bail. On the flip side, the ‘buy on dips’ crowds - not as aggressive as they once were - warmed up with an hour left in trading on Monday, lifting most equity indices near the highest points of the session.

Interestingly, the two biggest winning sectors thus far this year were the only decliners yesterday, as investors are still more interested in booking gains than falling in love with the story.  As the session moved along, buyers moved away from traditional safe havens and found Consumer Discretionary names, which enjoyed monster gains.

There have been lot of second and third-tier retail names like Kirkland’s (KIRK) that enjoyed amazing sessions with big gains on better than average volume.

However, the names in the spotlight, including airlines, dominated the session and headlines. It’s hard for me to chance them here, even as underlying fundamentals improve. I think buy and hold investors should cast their gaze elsewhere.

Transportation names are garnering the most attention via Google searches, probably paced by the uptick in airline traffic. It would only make sense for folks to connect those dots, but as usual, it should have been done weeks ago. 

Interestingly, the increased curiosity in Real Estate has captured our attention. It’s a big sector, but the core has a direct correlation with reopening and sending people back to the office. 

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Market Breadth

Market breadth was impressive yesterday, although the overall volume was light. 

Fear Abetting

What if I told you after four weeks of wild gyrations, including several huge down days, the Volatility Index (VIX), often referred to as the fear index, was at its second-lowest level since the start of the pandemic?

It’s true. The VIX is slightly above its lowest read of 19.97, hit on February 12, 2021. It is amazing, considering the end of the world narrative that’s dominated headlines and storylines.

Portfolio Approach

We added to Consumer Discretionary and Industrials in our Hotline Model Portfolio yesterday.

Today’s Session

Retail Sales & The American Consumer

Shout out to Bank of America, which called Retail Sales big time. With that in mind, the big number to focus on with today’s report on February Retail Sales is January revisions.  The headline number was initially 5.3%, but it has been revised to 7.6%.  January Retail Sales, ex-autos, revised to +8.3% from +5.9%, and ex-auto and ex-gas, revised to +8.5% from +6.1%.

This is critical because these numbers were influenced by $600 stimulus checks.

The current round of checks is $1,400.  So, while this report may give some folks pause, I suspect we are setting up for major spikes in the next couple of months.

To see the chart, click here.

Bank of America Retail Sales Estimates Posted Yesterday

Year to year trends were very strong, particularly for building materials, sporting goods and the Internet.

I do not think this report will factor into the Fed’s thinking other than give them confidence that when checks stop coming, consumers will become more cautious.