More Clues about the Impact of the Crisis: Some Positive Some Negative

North American markets today, Wednesday, viewed several hours before the opening at 9:30 a.m. EST look poised to start with a pullback from yesterday’s highs with all major indicators in the red.

These indicators are not static and can change. The S&P 500 in particular is edging up as I write this column and it is within the realm of possibility that it will make it into the green by or before market opening. The DOW and the NASDAQ are more deeply in the red but a climb into the green is not impossible.

European markets are open at time of writing and are deeply in the red and appear likely to stay there for the remainder of trading.

The safe havens of gold and silver, along with the British pound, Euro and Canadian dollar are all in the red at time of writing.

For another look at the impact of the pandemic crisis, Hilton Worldwide Inc. announces its fourth quarter results today, most likely with a very reduced year-over-year profit figure, due to reduced bookings. Marriott International Inc. reports fourth quarter results tomorrow although the sudden death of Chief Executive Officer Arne Sorenson may trigger a delay. Analysts are expecting reduced profit for the same reason.

Both chains have a roughly equal breakdown between Buy and Hold ratings amongst the Wall Street analysts that I checked. Both chains appear more dependent on a revival of consumer travel rather than business travel at least in the near term. Cost-cutting, layoffs, many of them permanent, furloughs, the explosion in online business videoconferencing, and the work-from home trend diminish the chance of a quick revival in business travel.

These results, combined with Carnival Corp.’s fourth quarter results showing losses of US$2.2 billion announced in January, United Airlines’ losses of US$1.9 billion also announced in January and red ink from a list of other airlines underline one of the many forms of financial reckoning driven by the crisis.

Much of that reckoning is driven by lifestyle changes which in turn have implications for investments. One of those changes may be a re-defining of retirement and retirement travel.

When the smoke clears from the crisis – on a date that is impossible to predict at this time -- it remains to be seen whether travel will play as large a part of the retirement lifestyle as we formerly believed, and I suggest that for three reasons.

Fear of infection has become deeply ingrained in our thinking and many will continue to resist holiday flying and cruising, notwithstanding assurances that operators will undoubtedly provide when the time comes.

Even for those willing to fly or cruise some financial brass tacks may prevent the kind of extended travel they had planned. The pandemic-related layoffs, firings, and pay cuts have taken a toll on many individuals’, retirement savings and therefore their plans. Many have drawn on their retirement funds to pay immediate bills or have pulled back on adding money to retirement savings.

Moreover, the changing definition of retirement – a trend already underway before the crisis, has changed. Many individuals have decided that continued employment has its own rewards.

The random variable here -- as yet unknown – is the extent to which ‘revenge spending’ will involve travel. ‘Revenge spending’ or more delicately termed ‘retail therapy’ refers to the belief that consumers will loosen up their spending after the crisis and spend on more luxuries – including higher-ticket luxuries than would have been the case otherwise.

All of this being the case, it may be useful for investors to review the weighting of travel stocks in their portfolios. Where investment dollars are limited, they may be more profitably deployed elsewhere.

The COVID 19-related effect on fourth quarter share results also brings some positive news.

Dual-listed Shopify Inc. is expected to report increased profit in its fourth quarter results today, driven in part by its increased popularity with merchants looking to take advantage of COVID 19-driven online sales. Canadian Tire Corp.  also dual-listed, reports fourth quarter results tomorrow and is expected to show increased sales due to home repairs during the crisis as well as Christmas traffic.

All of that being the case, although both of these stocks have high valuations, it may be useful for investors to review the weight of investments poised to continue profiting from the unparalleled surge in shopping online. Start from the position that markets will continue being fueled by stimulus, low interest rates and recovery. These factors will continue driving money into the markets through to the end of the year.

Related: We Don’t Know How Far Revenge Spending Will Go