Quote of the Week

“The soldier above all others prays for peace, for it is the soldier who must suffer and bear the deepest wounds and scars of war.” – Douglas MacArthur

Tech Corner

Last week was a big week. Not only were the markets up substantially, a lot of other things happened. Employment, the Fed, political trends, and COVID-19 all made important news suggesting that the recovery from the pandemic is moving into a new phase that is less reliant on the Fed and more on underlying growth. Remember we are in Quad II where growth is increasing.

The key risks that have held the economy back look better than a week ago. Employment resumed its recovery, and the Fed removed some if its extraordinary measures by announcing that they are going to start cutting back on their bond buying by $15 billion per month. The president has signed the key infrastructure bill which will create thousands of jobs. The economic effects of COVID are declining as more people get vaccinated or develop immunity from contracting the virus, plus children are now eligible for the vaccine.

As COVID cases decline and the end of extra unemployment benefits are starting to expire, this is spurring people to return to work and fill many open positions. Last month the country added 531,000 new jobs, which isn’t the highest monthly job number this year, but is a big improvement over the August and September jobs added.

The Federal Reserve announced it would gradually taper or reduce its bond buying program. The Fed has been purchasing $120 billion worth of bonds since March 2020. The bond buying program is designed to push long term interest rates lower by buying up long term government debt. Lower rates for government debt, increase demand for corporate bonds or other areas of the market and provides liquidity for those needing to roll over debt. It also helps keep mortgage rates low, encouraging home building and allowing some borrowers to reduce their payments by re-financing their mortgages. Given the strength in the employment data and other areas, the economy no longer needs bond buying by the Fed to support growth.

At this moment we are seeing green lights for equities and commodities going forward. If events change, we will change the focus of the portfolio. Now we are concentrating on small cap equities, growth equities, European markets, some Emerging markets, plus commodities.

 Lisa’s Thoughts

 Below is an excerpt from a complimentary research note by Hedgeye’s Gaming, Lodging & Leisure analyst Todd Jordan.

 As Covid headlines subside (at least somewhat) and clarity around international travel continues to improve, consumers are looking at future travel options and at a much higher rate than they were just a month ago.

The announcement of looser travel restrictions between the EU, UK, and the US were positive developments for leisure travel sentiment, and that positive sentiment is filtering through in more data indicators each week.

The below data which tracks flight search demand via Kayak, highlights the 2YR average growth in total flight searches for US domestic travel and Intl. travel.

Notice the delta dip in July into late August, but since the bottoming flight searches have been in acceleration mode, which should be a precursor to faster bookings growth.

The searches for outbound travel have started to catch up with domestic travel, which we think is a net positive for OTAs like EXPE that specializes in more complex vacation packages.  Note the dip in search activity over the last two days appears Halloween comp related, so not likely indicative of a new trend.

Seasonally, travel bookings slowdown in Q4, and we expect that seasonal pattern to hold; however, given the pent-up demand and need to rebook cancelled and postponed travel, we think the industry should show nice accelerating growth.








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These are Larry Lof’s opinions and not necessarily those of Cambridge, are for informational purposes only and should not be construed or acted upon as individualized investment advice. Past performance is not indicative of future results. Due to our compliance review process, delayed dissemination of this commentary occurs.

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