The resurgence of COVID-19 this summer has made consumers cautious and investors are cutting back on investment in the travel sector, which is still struggling to recover.

July retail sales fell by a staggering 1.1% as consumers spend less on clothing, furniture and sporting goods. At the same time, investors are withdrawing from cruise lines, airlines and other travel-related stocks as the number of cases of COVID-19 surged due to the highly contagious delta mutant.

The recession in spending and investment in the travel sector represents an unwelcome reversal from growth throughout the year. Vaccinations seem to be knocking down the virus, and after spending more than a year at home, people have more freedom to shop, eat out, and plan trips.

“Obviously, as we’ve learned in the last 18 months, there are undefinable twists and turns,” said Mike Stritch, Chief Investment Officer at BMO Wealth Management.

As people spend more on services, some of the recession in consumer spending on commodities was expected. According to the Supply Chain Association, the service sector, including restaurants, began to recover in July with record-accelerating growth.

Analysts aren’t expecting another series of blockades, but people can begin to reduce travel to restaurants and other public spaces, putting pressure on the recovery of the service sector.

“Our emotional indicators are starting to flash bright yellow to red,” Stritch said. “It potentially gives a pause in the short term.”

Concerns have been rising on Wall Street in recent months as analysts and investors have carefully tracked the rise in virus cases. The resurrection was strong enough that at the end of July the CDC recommended that even vaccinated people resume wearing masks indoors in public places.

Some airlines have warned that a surge in the virus could hinder their recovery. Southwest Airlines does not expect to make a profit in the third quarter after making a sufficient recovery to make a profit in the second quarter. Spirit Airlines states that the service meltdown that began in late July and the increase in COVID-19 cases have led to more last-minute cancellations and fewer bookings.

Major retailers have yet to raise concerns about the resurgence of the virus that keeps shoppers home. Both Wal-Mart and Target have given investors bright forecasts for the rest of the year. But investors are getting more attention.

The S & P 500’s consumer discretionary sector, including clothing companies and other retailers that rely on discretionary spending and face-to-face services, increased by just 0.5% in July and then decreased by nearly 1.5% in August. The sector rose just under 3.8% in June.

Chris Zaccarelli, Chief Investment Officer, said: For the Independent Advisor Alliance.

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COVID-19 revival puts pressure on spending and travel recovery | News

Source link COVID-19 revival puts pressure on spending and travel recovery | News

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