The latest surge in COVID-19 cases is beginning to have an effect on the economy, particularly travel. Consumers are slowing their spending, and investors are backing away from travel companies, according to an Associated Press report.
Retail sales dipped in July by 1.1 percent, which came as a surprise. As the potential rises for another COVID-driven slowdown, investors have been pulling away from cruise lines, airlines and other travel-related stocks.
This is a reversal from earlier in the year when vaccines made it seem as though consumers were feeling more positively about shopping and travel.
"Clearly as we learned over the course of the last 18 months this thing takes twists and turns that are undefinable," said Mike Stritch, chief investment officer of BMO Wealth Management.
Airlines have warned that their recoveries, which looked feasible earlier in the year, could be hampered by the change in sentiment, with Southwest Airlines reporting that it doesn't expect to be profitable in the third quarter after posting a profit in the second.
Spirit Airlines also said that a service meltdown that started in late July and a rise in COVID cases are softening bookings.
"A lot of the people who were optimistic that reopening would happen quickly are obviously disappointed, but we're looking at what's happening with the delta variant as more of a setback, not a change in direction," said Chris Zaccarelli, chief investment officer for Independent Advisor Alliance.
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