Tech roars back, Thanksgiving road travel expected to decline according to GasBuddy

Key Concepts

• AI Trade: The resurgence of investor interest in technology stocks, particularly those involved in artificial intelligence, leading to significant gains in indices like the NASDAQ.
• Federal Reserve Rate Cut: The possibility of the Federal Reserve lowering interest rates in the upcoming month, influencing market sentiment and investment strategies.
• Holiday Travel Trends: Analysis of consumer behavior during the Thanksgiving holiday, contrasting declining road travel with record-breaking air travel.
• Economic Anxiety: Factors contributing to consumer caution, including government shutdowns, low consumer sentiment, and significant layoffs.
• Gas Prices: Fluctuations and regional disparities in gasoline prices, with a focus on national averages and the potential for prices to fall below $3 per gallon.
• Airline Industry Dynamics: The impact of economic factors and operational challenges on airline profits and capacity, particularly in the budget travel sector.
• Stock Market Performance: Observations on the NASDAQ's rally, the performance of "Mag 7" tech stocks, and the potential for further upside.
• Precious Metals: The recent movement in gold and silver prices, with an analysis of support and resistance levels.
• Cryptocurrency Market: An examination of Bitcoin's recent performance, potential resistance levels, and long-term outlook.
• US Dollar Index: The current position and potential future movements of the US dollar and its impact on various asset classes.

Holiday Travel and Consumer Behavior

Thanksgiving Travel Split

The Thanksgiving holiday period is characterized by a notable split in American consumer travel behavior. While road travel is weakening sharply, air travel is projected to reach record levels.

• Road Travel Decline:

  • Despite gas prices being near multi-year lows, only 60% of Americans plan to drive this year, a decrease from 72% in 2024.
  • This decline is attributed to economic anxiety, stemming from factors like the recent government shutdown impacting federal workers, and a low consumer sentiment (University of Michigan consumer sentiment for October was at its lowest point since 2022, with early November data also concerning).
  • Significant layoffs, the most substantial since 2022, also contribute to this uncertainty, keeping Americans "a little bit on edge."
  • Even though 74% of respondents stated gas prices are not impacting their travel, an underlying "tinge of uncertainty" is keeping some closer to home.

• Record Air Travel:

  • US Airlines are predicting a record Thanksgiving holiday travel period, with over 31 million people expected to fly between Friday and Monday.
  • This surge in air travel occurs despite airlines facing challenges in filling planes earlier in the year.
  • The end of the government shutdown has reopened travel possibilities.
  • The TSA is predicting record travel, with airports like O'Hare showing resilient air traveler numbers in October.
  • The trend indicates a move towards increased mobility and longer travel periods throughout the year, with airlines noting a lengthening travel season beyond traditional summer peaks.
  • Airfare remains relatively low and affordable, which, combined with the resolution of the FAA shutdown uncertainty, may encourage last-minute trips.

Gas Prices Outlook

• National Average: The national average gas price is expected to tie what it was a year ago, currently sitting about two cents above last year's level.
• Affordable Prices: A positive development is that 28 states are seeing an average price below $3 a gallon.
• Regional Disparities:
  • Highest Prices: The West Coast (California, Hawaii, Washington State) continues to have the most expensive gas.
  • Lowest Prices: Areas with lower gasoline taxes and proximity to major refineries, such as Texas, Oklahoma, and Louisiana, offer lower prices.
• Sub-$2 Gallon Prices: Gas Buddy has tracked four stations just outside Oklahoma City falling below the $2 a gallon mark. This is the first time for "sustainable sub-$2 prices" since 2021. Earlier instances in Colorado were considered temporary promotional stunts.
• Future Outlook:
  • The national average is expected to continue falling in the weeks ahead.
  • Refinery issues, including a fire at the largest refinery in the Midwest and pipeline shutdowns on the West Coast, have delayed the potential for sub-$3 a gallon gas.
  • However, "all lights are go" for this to happen soon, with the national average flirting with sub-$3 prices at $3.01. It may take another week to reach this threshold.
  • The expectation is that most of the remaining year will see national averages at or below the $3 a gallon mark.
  • This outlook is supported by some of the lowest oil prices in the last four years.

Airline Industry and Holiday Travel Profits

George Ferguson, Senior Aerospace, Defense, and Airlines Industry Analyst at Bloomberg Intelligence, discusses the impact of recent uncertainties on holiday travel and airline profits.

• Booking Patterns:

  • Traditionally, holiday flyers book further in advance. For business travelers, this is typically 14 days out. For leisure travelers, it's often 58 to 62 days before travel in October, November, and December.
  • Many travelers likely booked their Thanksgiving and year-end holidays before the government shutdown, suggesting it may not have significantly altered their plans.

• Impact of Government Shutdown:

  • A 14-day window saw a 10% reduction in operations for all US airlines.
  • Calculations, even with adjusted load factors (airlines carrying more people on fewer flights), suggest airlines likely operated 90% of their scheduled flights for the quarter, assuming no further major interruptions.
  • This slight reduction in flights, coupled with increased load factors, had a minor impact on profitability and margins, with some airlines potentially seeing improved margins if they reduced high-cost regional operations.
  • Overall, Ferguson does not foresee a "really big material change in expected results for Q4" due to the shutdown.

• Broader Holiday Trends:

  • Holiday travel is highly channeled, with significant travel occurring the week of Thanksgiving and returning on Sunday, often the busiest travel day. This typically benefits airline fares.
  • The trend of "work from anywhere" may lead some to push travel plans into the previous week for better fares.
  • Consumers, especially in the basic economy segment, are looking for deals and feeling squeezed by inflation, leading to a potential fall in fares into Q4 compared to Q4 of last year.
  • If there are no major travel interruptions, holiday travel results are expected to be close to initial quarterly expectations.

• 2026 Travel Survey Insights:

  • A survey for 2026 indicates a lower number of people planning to prioritize vacations (29% next year vs. 36% a year ago).
  • This is attributed to basic economy travelers being squeezed by inflation and concerned about the economic outlook, causing them to rethink the importance of their annual vacation.
  • Conversely, more affluent travelers want to spend more on travel and seek better experiences. This "premium traveler" trend has been consistent throughout the year.

• Implications for Discount Airlines:

  • The trend of premium travelers doing well and basic economy travelers economizing has implications for discount airlines, which may continue to face challenges.
  • Post-pandemic, airlines may have built too much basic economy capacity.
  • There is a need to rationalize capacity in the budget travel space.
  • Examples of financial struggles include Spirit Airlines declaring bankruptcy again and other budget carriers like JetBlue and Frontier not performing as well.

Stock Market Trends and Technical Analysis

Jared Blickley from Yahoo Finance provides insights into the stock market's performance.

Tech Sector Rally and AI Trade

• NASDAQ's Strong Performance: Stocks closed higher to start the holiday-shortened trading week, with the NASDAQ posting its best day since May.
• Tech Roaring Back: The tech sector is showing significant strength, with tech up 2.38% on the day.
• Alphabet's Record High: Alphabet is leading the way for big tech, reaching another record high and reigniting the AI trade on Wall Street.
• Other Notable Tech Gains:
  • Broadcom was up 11%.
  • Tesla was up 7%.
• Technical Outlook:
  • The year-to-date chart for the NASDAQ suggests a "false breakdown", indicating a potentially strong recovery. Blickley anticipates testing previous highs.
  • While a head and shoulders pattern is a possibility, it's considered "premature to call" at this stage.
  • The current market action is characterized by bullish price action in key tech sectors and "Mag 7" stocks.
  • The market is heading into a seasonal period that tends to favor bulls, with "not a lot of risk this week."
  • Historical analysis of market trouble around Thanksgiving and Black Fridays this century shows only three instances: 2008, 2014, and 2021.

Precious Metals Performance

• Gold and Silver Movement: After a period of inactivity, gold and silver futures saw movement.
• Silver:
  • The year-to-date chart shows a pullback after an initial run.
  • The price is currently between significant support and resistance lines.
  • Excitement is reserved for a break to the upside.
• Gold:
  • The chart is not dissimilar to silver's.
  • Gold is still up 55% year-to-date.
  • The current pattern resembles a pennant, suggesting potential for a break above and a test of previous highs.
  • Central banks have been significant buyers, but ETF buyers have been the primary drivers of the year's rally.
  • Blickley is watching for ETF buyers to return and acknowledges the ability of speculators to drive the market.

Cryptocurrency Market Analysis

• Bitcoin's Recent Performance: Bitcoin is up 1% on the day, but a 3-day look shows a 4% gain from recent lows.

• Price Action: From a low of $82,000, Bitcoin has risen to approximately $88,000-$89,000, a $7,000 gain.

• Year-to-Date Chart: The year-to-date chart shows a significant decline.

• Resistance Levels:

  • Blickley previously called for $75,000.
  • A potential resistance block is identified between $90,000 and $92,000, where shorts are expected to enter in large numbers.
  • The market is not considered "in the all clear" until it reaches $110,000.
  • Breaking past $110,000 would significantly increase the chances of reaching previous highs.

• Expert Opinion on Bitcoin:

  • Eddie Johnson, author and crypto expert, advises investing when "blood is in the streets, even your own."
  • He emphasizes practicing "GMBB3": Do Your Own Research, Know Your Entries and Exits, and Invest Deliberately.
  • Johnson is unfazed by Bitcoin's current downturn because the infrastructure for Bitcoin to become a usable, tangible value is already in place.
  • He believes Wall Street's investment in Bitcoin infrastructure makes a sustained high of $125,000-$126,000 unlikely to last for years again, though "anything's possible."

US Dollar Index

• Current Position: The US dollar index has not moved significantly today but is at a critical potential resistance point.
• Potential Momentum: If the dollar index moves higher, towards 101, momentum could build.
• Trading Pattern: The index has been trading mostly sideways over the last three months.
• Breakout Scenario: A break of the "rounded bottom" and a neckline around 100 could lead to momentum that weighs on futures, including gold, silver, crypto, and potentially stocks, as it represents a "non-consensus trade."

Conclusion

The current market environment is a complex interplay of economic anxieties, evolving consumer behaviors, and technological advancements. While economic uncertainty is dampening road travel, record-breaking air travel is expected for Thanksgiving. Gas prices are showing signs of further decline, with significant regional variations. The tech sector, particularly driven by AI, is experiencing a strong rally, with major indices and individual stocks showing robust performance. The precious metals and cryptocurrency markets are showing signs of potential upside, though key resistance levels need to be overcome. The US dollar's trajectory also holds significant implications for various asset classes. Investors are navigating these trends with a focus on both short-term opportunities and long-term structural shifts.