Travel stocks fell. How will this influence the economy?

Travel stocks fell. How will this influence the economy?

Travel stocks are often good indicators if the global economy is flourishing or plunging low. When people have a stable and good income, they journey a lot. Likewise, if travel is suspended, it means that not everything is okay.

This proves true presently, as the coronavirus outbreak caused the transportation stocks to plunge low. People prefer to stay home due to infection fears. As a result, the Dow Jones Transportation Average (DJT) dropped down by 5% in the past week and is almost 18% below its 52-week high.

That’s not the only example. Experts are concerned that the transportation index is nearing to a bearish point, which means that stocks are well on their way to losing more than 20% gains. The index covers 20 shares so far, among them commercial airline giants United, Southwest, and Delta.

The railroad operators Union Pacific and CSX, as well as trucker J.B. Hunt and package delivery leaders FedEx and UPS also lowered sharply. Like the airlines, railroads, shippers, and truckers deliver consumer goods from factories to warehouses and retailers, their handicap means that the sellers will suffer too.

Richard Steinberg, the chief market strategist with the Colony Group, noted that transportation stocks are a leading indicator of anxiety, as the travel plans are the first thing that people are canceling. And the truth is, no one knows how long the outbreak will continue. Meanwhile, airline stocks stay in the red.

What about business travel? 

It seems that companies have also decided to move on to online conferences instead of traveling. Microsoft, Google, Apple, and Amazon announced that they plan to cut back on corporate travel. That’s not good for online travel companies, such as Booking, Expedia, TripAdvisor, and others.

Moreover, hotel chains also suffered. Marriott, Hilton, Wyndham, and Hyatt fell during the last month. The analysts stated that if travel stocks drop further, that would be a bad sign for the entire economy.

However, Steinberg is hopeful that the shares will rebound soon. You can only use Zoom video conference calls for so long to do business – he noted, there will be normalization for the transportation sector eventually.