From food to flying, we’re looking at Thanksgiving’s biggest market movers

As we all well remember, Thanksgiving took something of a hiatus in 2020, when most people opted to keep social gatherings to a minimum. So it’s no surprise that this year, Americans are eager to spend Turkey Day with family and friends.

Although Wall Street is closed for Thanksgiving, the holiday can still affect the financial markets significantly — particularly, the travel and food industries. From an investor’s perspective, what are we likely to see happening at this time? Is business lagging or back to normal? Or perhaps even stronger now, due to last year’s lapse?

Travel: Back to pre-pandemic levels 

After being obliged to nix travel plans for so long, a lot of people are understandably happy to have this aspect of life return. More than 53 million Americans are expected to travel this Thanksgiving, which would bring holiday travel back up to pre-pandemic levels and mark the highest single-year increase since 2005. Most of this traffic will be people traveling to visit friends and relatives, with others taking advantage of the long weekend and reopened borders in order to take a vacation.

Given this scenario, airlines are likely to benefit financially at this time. However, while demand for air travel is on the rise, airlines — many of which are already struggling just to stay in business — are dealing with new challenges. Jet fuel hasn’t been this expensive since 2014, and mass cancellations due to staffing shortages have been common. It’s a balancing act for airlines to keep prices attractive for travelers despite rising costs, but average airfares are actually lower than last year. Holiday bookings are strong so far, and airline executives have said that they don’t expect disruptions, an encouraging sign for those in the travel industry.

Other travel-related sectors to watch are hotels and car rentals. Mid-range hotel rates have jumped up about 39%, and car rental rates have increased by 4% as compared to last Thanksgiving. 

Food: Consumption is up, but so are costs 

Americans are spending more on groceries and consumer packaged goods as people continue to eat more meals at home, even as restaurants remain open. Supermarket chains were among the businesses to gain the most from the pandemic, and the holidays are only expected to maintain that trend. Customers are also buying more groceries online the food and beverage category outpaced all others in online sales growth in 2020, and growth is expected to continue over the next few years.

However, to the dismay of shoppers, consumer prices (as measured by the Consumer Price Index) jumped more than 6% in October, and food’s inflation rate has continued to rise. Surging fuel costs and the labor crisis remain big challenges for the food industry as well. This could mean even more advantages for online grocery outlets, which generally have less overhead than brick-and-mortar stores.

Another industry trend on the rise is natural and organic food. While consumers have been focusing on healthier food choices for a while now, the pandemic has helped to boost attention on wellness and nutrition. Most mainstream food manufacturers have made efforts to align with these consumer preferences, and many more niche companies have sprung up. Particularly as prices rise, food quality becomes even more important as people cut out unnecessary “junk” purchases and seek to get more nutritional value for their spending. While family favorite desserts certainly shine at Thanksgiving, these organic and health-conscious trends may well last (or increase) around the holiday.

Just the beginning 

Thanksgiving marks the start of the end-of-year holiday season, and, therefore, can be a good indicator for analysts on how consumer spending will go as Christmas approaches. As the weather turns colder, investors can be on the lookout for ways to capitalize on what is usually a warmer market sentiment for the holidays.

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