Don’t Let the ‘Delta Drag’ Get You — or Your Portfolio — Down

If you’re a fan of the “Godfather” franchise, you’re familiar with Michael Corleone’s famous line in the third film: “Just when I thought I was out, they pull me back in.”

Although Corleone was referring to the mafia, many investors are feeling the same way about the COVID-19 pandemic.

We all hoped and expected the worst was behind us. But now Delta — along with Delta-plus, Lambda, Kappa, Iota and a growing Greek chorus of variants — is throwing a wrench in the works.

This time around, we probably won’t see widespread business shutdowns, nor will the economy and markets threaten to collapse like they did last March and April.

But as case counts return to peak pandemic numbers in some places, fear is also on the rise.

Corporations are delaying return dates ... some conferences and festivals are being canceled ... and restaurant customers are opting for takeout once again.

Yet, the markets continue to flirt with all-time highs. But how long will it last?

More importantly, do you own the right investments capable of withstanding the next wave?

What Goes Up …

One of the best, most timely sources of information is airport screening data from the Transportation Security Administration (TSA).

It can be inferred that the more travelers being screened at the nation’s security lines, the less worry about COVID-19 risk there is.

On Monday, TSA screened 2.02 million passengers.

That’s a HUGE improvement from the roughly 761,900 a year earlier ... but it’s still well shy of the 2.57 million in August 2019. And there are signs that the rate of change between activity two years ago and this summer is starting to worsen.

Another good place to look for clues about shifting consumer behavior is the restaurant booking firm OpenTable, which tracks reservation activity.

You can see the huge drop-off in spring 2020 activity relative to 2019, followed by a gradual recovery later in the year. You can also see a brief INCREASE in activity in June relative to 2019.

Source: OpenTable

But that brief pop has given way to a renewed drop. It’s clear that stems from the renewed rise in cases tied to the Delta variant.

A third place you can see where consumers will — or, more appropriately, won’t — spend money is on Wall Street.

These three exchange-traded funds (ETFs) give us an idea of what the smart money sees in the near term:

•  The U.S. Global Jets ETF (NYSE: JETS), which invests in airlines, has lost about 7% in the last month.

•  The Invesco Dynamic Leisure and Entertainment ETF (NYSE: PEJ), which holds restaurant, movie, casino and travel stocks, has shed 4%.

•  Newer, more thinly traded ETFs — like the AdvisorShares Hotel ETF (NYSE: BEDZ) that owns hotel and casino stocks — are down a couple of percentage points.

That seems pretty depressing at first glance, but we have plenty of reasons to take heart.

Here’s Some Good News

Remember: Investors weren’t just worried earnings or sales growth could slip a few percentage points last spring. They were worried many of these companies would default on their debts ... or even go bankrupt!

Now, most companies know how to operate in a pandemic. And they have the benefit of not having to deal with widespread, full-scale shutdowns like we saw in early 2020.

Moreover, our health care workers have more knowledge about COVID-19 now than they did just one year ago.

Plus, tens of millions of Americans are now vaccinated compared with zero back then. That means outcomes will be better on the whole.

So, the “Delta Drag” That’s Quietly Underway May Just Stay That Way

From a human and social perspective, the Delta variant surge is disheartening and unfortunate. No one wants to see hospitalizations and deaths climbing again, especially now that we have highly effective vaccines that we didn’t then.

But from a purely market-focused perspective, the risks are lower now than they were then. So, rather than take an extreme approach, like selling everything and moving to cash, use a “Safe Money” investing strategy instead!

You know what that entails if you’ve been following my work, right?

•  Focus on higher-yielding, higher-rated ETFs and stocks that help you generate income in a zero-rate world.

•  Maintain “chaos insurance” in the form of gold, silver and precious metals investments.

•  Have some cash in reserve.

•  And don’t chase high-momentum, “garbage” stocks with no profits and no long-term prospects.

Stick with that approach and I’m confident you can make it through the Delta variant crisis with your portfolio intact ... and growing!

Until next time,

Mike Larson