The Labor Day holiday weekend is coming up, and Americans will try to make the most of the three remaining days of the summer travel season. While these are mostly about fun and frolic, the investing world can also cash in on this travel trend as transportation stocks and ETFs become its largest beneficiaries.
Improved wages and a healing job market have encouraged consumers to binge on discretionary activities like traveling. Consumer confidence was also at an 11-month high in August, indicating that people have greater confidence in economic well-being. Investors should note that higher wages and lower gas prices pushed up consumers' disposable income by 3.5% over last year.
AAA indicated that over 35 million Americans will travel this year during the Labor Day holiday weekend, marking "the highest travel volume for the holiday since 2008 and a one percent increase over 2014."
How Does Travel Benefit ETFs?
As per the source, the average price of gas this summer was 26 cents lower than last year and $1.34 below the levels seen in 2013 and 2014. Around 86% of all travelers will hit the roads. And road travel will likely rise 1.1% this year.
Air travel will see an increase of 4% year over year this Labor Day weekend. Air travel volume will likely be the maximum in nine years for this holiday period and will see a year-over-year uptick of 1.5%. Lower air ticket prices are one of the reasons for this jump.
And since no vacation is complete without eating out and shopping, restaurants and lodging stocks also deserve a note.
Below we highlight a few ETFs that stand to gain on final summer holidays.
These ETFs offer exposure to railroad, air freight & logistics, trucking and airlines. The choices are:
iShares Transportation Average ETF (NYSEARCA:IYT)
SPDR S&P Transportation ETF (NYSEARCA:XTN)
U.S. Global Jets ETF (NYSEARCA:JETS)
This fund provides exposure to the global airline industry, including airline operators and manufacturers from all over the world. JETS was up about 4% in the last one month.
Leisure and Entertainment ETF
PowerShares Dynamic Leisure & Entertainment Portfolio ETF (NYSEARCA:PEJ)
The fund gives exposure to a broader array of leisure and entertainment stocks that include restaurants, cruise companies, airlines and leisure travel companies. The 35-stock fund's top three holdings are United Continental Holdings, Yum! Brands and Delta Air Lines.