Will Higher Inflation Limit This Travel & Vacation ETF?

From airline tickets to the price of fuel, travel costs are rising across the board. The positive is that wage inflation is also occurring, which could potentially mute some of its effects.

“Current reported inflation (which does not include food costs or oil!) is at a 40-year high and comes in at about 7.5% according to estimates, costing Americans an extra $276/month at the moment,” a Live and Let’s Fly article says. “In line with these figures, airline prices have risen about 7% year on year. However, those rises are historical as they took place during the omicron outbreak (almost a million new cases/day for a couple of weeks) and occurred during a limited travel period with high levels of restrictions.”

“For those who might avoid packed planes and sky-high prices, road trips are no refuge,” the article adds. “Pain at the pump has increased the national average price of regular gasoline to nearly $4/gallon.”

Investors looking to make a bullish travel play could consider the Direxion Daily Travel & Vacation Bull 2X Shares (OOTO). The fund focuses on returning 200% of the BlueStar® Travel and Vacation Index.

The index exposes traders to global commercial airlines, hotels & resorts, resort casinos, travel agencies, online travel booking sites, hotel REITs, cruise lines, theme parks, and ski resorts. The fund was trading as high as 14% by mid-February before falling, particularly after Russia’s invasion of Ukraine in the final week of February.

The fund is down 33% on the year, but it will be interesting to see if it can rise again just before the start of vacation season in the spring and summer. It’s one that traders will keep an eye on while the situation between Russia and Ukraine continues to play out and the Fed tunes its monetary policy to deal with inflation.

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