Want to buy the dip in the aviation market with no delays and no layovers? If so, then you might want to try a position in the U.S. Global JETS ETF (NYSE:JETS). After all, it’s a heck of a lot easier to buy and hold the JETS ETF than to keep tabs on many individual airline stocks.
On the other hand, investing in this fund means you’ll need to have a general awareness of the airline industry. That being said, there’s an advantage in owning this ETF. Specifically, overall volatility may be reduced by owning it in lieu of individual airline stocks.
Beyond a basic knowledge of how the aviation market is faring, you’ll also want to pay close attention to seasonal trends. Plus, it’s important to examine the price action of the JETS ETF. We can use that (warning: puns coming) as a point of departure as we prepare for takeoff with JETS.
A Closer Look at the JETS ETF
Since the end of 2018, the JETS ETF has been quite range-bound. For more than a year, short-term traders could have bought the dips at $28 and sold the rips at $31. That rinse-and-repeat strategy was reliable until the onset of the novel coronavirus rattled the airline industry.
That black-swan event gave rise to a rare buying opportunity as the share price was cut in half. However, we only know in hindsight that the JETS share price bottomed out at the $12 level. If it should happen to get there again, JETS will be practically begging you to buy it.
Yet, we must work with the price that the market’s presenting to us today. And that price is somewhat above the bottom, but still a considerable bargain compared to where JETS traded just half a year ago. But does JETS have enough fuel to fly back to its previous high point?
Autumn of Discontent Coming?
It’s not every day that big-name analysts wax poetic, but JPMorgan’s Jamie Baker took a Shakespearean turn not too long ago. As a writer it’s nice to read a fellow wordsmith’s musings, but Baker’s tale of woe for the airline market had no happy ending.
“The autumn of discontent is gradually approaching, which is why we don’t view increased summer schedules as a harbinger of solid recovery,” prognosticated Baker. That’s ominous and Baker’s words warrant our attention, but does this seasonal prognostication hold weight?
It’s hard to say at this point. A number of seasonal trends were disrupted once Covid-19 hit. Baker observed improvement in traveler data provided by the Transportation Security Administration. Yet, he predicted that this improvement is “likely to moderate” in the fall.
Government Likely to Come Through
Yet, that’s tantamount to predicting the progression of Covid-19 itself. And that’s something that even the top analysts can’t predict. For all they know, a remission in the course of the virus could cause a massive spike in travel activity.
What’s much more predictable than the future of the coronavirus is the U.S. government’s penchant for bailouts. Not too long after the pandemic hobbled the economy, the government offered the airline industry a $25 billion bailout.
If there’s anything we’ve learned from the financial crisis of 2008-2009, it’s that the government has deep pockets and a willingness to give handouts to big businesses. There’s little doubt that the major airlines, which make up much of JETS’s holdings, will continue to benefit from the government’s seemingly bottomless largesse.
The Bottom Line on the JETS ETF
If you’re not in the mood to sift through individual airline stocks, you can just buy the JETS ETF and leave it in your account.
Seasonal patterns may come and go, but throughout it all, governments always love to provide stimulus and the major airlines certainly love to receive it.
David Moadel has provided compelling content – and crossed the occasional line – on behalf of Crush the Street, Market Realist, TalkMarkets, Finom Group, Benzinga, and (of course) InvestorPlace.com. He also serves as the chief analyst and market researcher for Portfolio Wealth Global and hosts the popular financial YouTube channel Looking at the Markets. As of this writing, David Moadel did not hold a position in any of the aforementioned securities.