General Body Meeting 4/9: Market Update, State of the Economy, and JETS Pitch

The Chairman of the Board Parth Patel ’21 and Julia Daly ’24 provided this week’s market update. The S&P 500 rose +0.42% to 4,097.17, hitting an all-time high. This is remarkable considering that during the lows of the COVID crisis the S&P sat around $2300.  The blue-chip index, the Dow Jones Industrial Average, was also up +0.17% to 33,502.39. The tech-based Nasdaq rose +1.03% to 13,829.31.  Gold also rallied this week, rising +0.84% to $1,756.20 per ounce.  Julia Daly took a look at the current state of the U.S. economy and the tax code plan.  The proposed tax code plan would add 0.5 percentage points to GDP over the next decade, with the corporate tax rate changing from 21% to 28%.

Alex Hunter ’24, Energy Analyst Tate Harobin ’22, and Evan O’Connell ’24 finished this week’s meeting by pitching the Global Jets ETF (JETS).  The group started their pitch by explaining to the club what an ETF actually is. An ETF is an Exchange Traded Fund and is traded on the exchange like a stock. This financial instrument can track stocks in an industry or a complex set of equities. It can be used as a tool for greater exposure without buying multiple stocks.

The group listed several catalysts for JETs. There is a clear desire among people in the United States to travel. Airlines are a ‘recovery stock’, and although the market has more than recovered from March 2020 lows, actual practices (things returning to “normal”) have not gone into effect yet. The primary reason that these stocks have recovered has been based on investor sentiment, and they should continue to rise as confidence in airline returns. The Government also assisted the airline industry during the March crash ($25 billion). This shows that the U.S. government refuses to let the airline industry go away

This pitch is not trying to time the market. The club takes long-term positions, and the group believes that diversified exposure to the airline sector will be beneficial in the long run for the club. This ETF will help balance out the large tech portion of the portfolio and strengthen the industrials sector.  Despite the diversification of ETFs, there are still risks associated with an investment. The airline industry as a whole has still not recovered from the pandemic. However, the group expects PE ratios to go lower as revenues begin to increase again.

There are also significant concerns about the industry’s Covid-19 recovery. There are new variants emerging throughout the world that could hinder air travel. Countries may also begin requiring a “COVID passport” that proves that you were vaccinated, this could significantly decrease the number of people traveling internationally via plane.

While the club was hesitant to invest in an ETF and had concerns over the long-term growth of JETS, the club decided to buy. Congratulations to Alex, Tate, and Evan on a successful pitch!

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