The Aviation Industry’s Long Road to Recovery

Plus: The Market’s Next Few Weeks You are receiving this limited-time email resource as a subscriber to Kiplinger's free e-newsletters. To unsubscribe at any time, simply click the link in the footer below. FEBRUARY 19, 2021 [View in browser]( HOW TO PROTECT AND GROW YOUR BUSINESS AND INVESTMENTS NOW The beleaguered aviation industry will stage a comeback this year, but the road to recovery will be a long one, according to a recent lead story in [The Kiplinger Letter](. Global air travel demand won’t reach pre-COVID levels until 2022 at the earliest, and maybe not until 2023 or 2024. That’s despite the tailwinds of many effective COVID-19 vaccines and significant, pent-up demand for air travel. U.S. air travel volumes are still half normal levels and aren’t expected to pick up until later in 2021. Expect the recovery to be uneven. Demand for domestic travel will soar as the pandemic wanes in some countries, but international travel will be much slower to bounce back. Likewise, leisure travel will outpace business travel. --------------------------------------------------------------- SPONSORED CONTENT FROM IDENTITYFORCE [Protect Your Financial Health – Get 24/7 ID Protection from IdentityForce]( Protect your wealth from sophisticated cyber thieves with #1 rated IdentityForce. Get 24/7 bank and investment account monitoring and identity threat alerts. Fix fraud with expert recovery services. [READ MORE]( --------------------------------------------------------------- Going forward, airline budgets will likely be squeezed, which is bad news for aircraft manufacturers like Airbus and Boeing. Worldwide, the airline industry took on over $200 billion in debt last year. Companies further up the supply chain are also struggling, such as GE Aviation, a maker of jet engines, and Spirit AeroSystems, which builds aircraft structures. One bright spot: Air cargo demand, which will return to prepandemic levels soon. The bottom line is that the industry’s future will likely be one of slower growth. Investment research firm BCA Research warns that the next few weeks are critical for the market’s near-term direction. According to a note this morning from its European Investment Strategy service, “the post-2008 boom in risk-asset valuations is rational given the exponential relationship with collapsing bond yields.” The problem? Bond yields have roared back of late, but the stock market’s forward-looking price-to-earnings ratio continues to climb. Also problematic, BCA says, is that bond yields have recently breached the technology sector’s “earnings yield” -- an event that is turning this so-called rational market bubble into an irrational one. “Going forward, irrational valuation can revert to rationality in three ways,” BCA Research says. “1.) Stock prices decline. 2.) Bond yields decline. 3.) Stock prices and bond yields drift sideways while (forward) earnings gradually rise to improve stock valuations.” For the moment, BCA suggests a wait-and-see approach -- not pulling out on investments, but not putting new money to work, either -- to see whether valuations revert to rationality. Free download, [The Kiplinger Letter's Forecast](. No information required from you. SPONSORED CONTENT FROM SMARTASSET [These are Your 3 Financial Advisors in Your Area]( Finding the right advisor that fits your needs doesn't have to be hard. SmartAsset's free tool matches you with fiduciary financial advisors in your area in 5 minutes. [READ MORE]( RELATED LINKS [9 Stocks With Surprisingly Reliable Special Dividends]( [What's the Recovery Rebate Credit?]( [Small-Business Owners Can Be Divided into 2 Camps – Which Are You?]( [Retail: Sales Jump in January on Stimulus Checks]( [Sign Up Free for Kiplinger's Retirement E-Newsletter to Plan for and Make the Most of a Richly Rewarding Retirement]( [Kiplinger] [Facebook]( [Twitter]( [LinkedIn]( Send this to a friend. [Click here.]( All content ©2021 The Kiplinger Washington Editors 1100 13th Street, NW, Suite 1000 Washington, D.C. 20005 Thank you for subscribing to Kiplinger's A Step Ahead, a free resource to help readers navigate the economic recovery from COVID-19. If you ever wish to stop receiving this service, please [click here to unsubscribe](.