Although the final curtain appears to be coming down on the Covid-19 pandemic’s year-long drama, the U.S. State Department is planning for an encore.
For those who may have missed the news, the State Department issued an ominous new warning about traveling to “high risk” regions of the globe. Last Monday, the department raised its travel alert level for a significant number of countries, as it weights Covid-19 data more heavily in its rating system.
According to the new system, more than three-fourths of the globe’s nations remain so risky that they warrant a Level-4 “Do not travel” rating from the State Department. That’s the level typically reserved for places where one might suffer imprisonment or life-threatening attacks, simply for being American.
Prior to this revision, only 16% of the countries around the globe garnered a Level-4 rating. But on Monday, that percentage soared to a whopping 80%. More than 160 countries now wear the “Do not travel” label.
Not surprisingly, this announcement dealt a blow to travel-related stocks … at least temporarily. But I believe this setback is offering a new opportunity to establish, or increase, positions in the travel sector.
I’ll show you how in today’s issue …
Canada Is Now as “Safe” as North Korea
The State Department’s revised guidelines seem so bizarre and nonsensical that they will probably not create any lasting headwind to the global travel recovery that is underway.
According to the new rating system, for example, Americans traveling to Canada face a Level 4 risk, comparable to visiting North Korea or Venezuela.
Similarly, the State Department now deems Norway, the Netherlands, Luxembourg, Germany and Denmark to be Level 4 travel risks, just like Myanmar, Iraq and Libya. So if you are to heed the State Department’s new guidance, you will want to defer your European vacation again this year and visit “less risky” locales instead.
You could, for example, take a swing through some of the “safer” Level-3 countries of Africa, like Sierra Leone, Rwanda and Liberia … or not. Instead, you could simply ignore the new guidelines and roll the dice on Level-4 locales like Iceland, Luxembourg, Switzerland or Sweden.
Clearly, this “guidance” might not be as helpful as intended. The State Department appears to be sounding the alarm at the very moment when Covid-related risks are finally in retreat.
Covid-vaccination rates are soaring in many countries, including most of the European countries that just joined the Level-4 group.
Here in the United States, more than 85 million Americans have completed their Covid-19 vaccinations. That’s about one-third of the adult population. And this tally has been increasing at a rate of about 9 million per week.
As the chart below shows, a rapidly growing percentage of Americans have received a vaccination dose. That uptrend is helping to produce a similar uptrend in “traveler throughput,” according to Transportation Security Agency (TSA) data.
The connection between a rising vaccination rate and rising travel activity makes perfect sense … so much so that I would expect global travel activity to continue trending higher in step with vaccination rates, no matter how menacing the State Department’s new ratings may be.
Presumably, close to 100% of Americans who plan to travel overseas would obtain a vaccine before making any travel plans. Nevertheless, the State Department seems to perceive a growing risk, rather than a declining one.
Hanging Out the Welcome Sign
This baffling posture stands in stark contrast to the numerous countries around the globe that are devising intelligent processes for reopening international borders and resuming international air travel.
Iceland, Croatia, Greece and Israel are among the countries welcoming or about to welcome vaccinated Americans. Other countries are trying to facilitate and revive travel activity by fast-tracking some type of “vaccine passport.”
Many airline and hotel companies are also supporting these efforts by testing various tech-based solutions that can verify a passenger’s Covid-19 vaccination or testing results.
As Bloomberg Businessweek reports:
“Singapore Airlines has begun a trial of IATA’s Travel Pass app, as has Qatar Airways … In the U.S., American Airlines Group Inc. has signed on with the VeriFly app being rolled out by biometric software company Daon. United has developed its own in-house platform, Travel Ready, which will allow passengers bound for certain destinations to upload vaccination records starting in early April … Hyatt Hotels Corp. on March 9 announced it was exploring the use of VeriFly to help guests attend meetings at its properties.”
One way or another, global travel will continue its stop-start recovery. Most likely, both vaccines and vaccine passports will facilitate that recovery.
The State Department’s new rating system will not stop it.
I continue to believe that travel-related stocks offer some of the stock market’s best risk-reward opportunities for the coming 12 to 24 months.
And if this week’s pullback in the sector continues, it will put those trades solidly back in the “Buy” zone.
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NOTE: On the date of publication, Eric Fry did not own either directly or indirectly any positions in the securities mentioned in this article.
Eric Fry is an award-winning stock picker with numerous “10-bagger” calls — in good markets AND bad. How? By finding potent global megatrends… before they take off. In fact, Eric has recommended 41 different 1,000%+ stock market winners in his career. Plus, he beat 650 of the world’s most famous investors (including Bill Ackman and David Einhorn) in a contest. And today he’s revealing his next potential 1,000% winner for free, right here.