Another unsolved plane disaster couldn’t have happened at a worse time for the global economy and travel industry. (The rampant speculation of terrorism as a cause is the element that makes the crash of EgyptAir MS804 even more foreboding.)  There will surely be economic and political ramifications. For the former, the fact this occurred in Egyptian airspace recalls the scene of horrific incidences in the recent past, including the downing of a Russian plane flight out of Sharm el-Sheikh that killed 224 people  in October 2015.

Tourism in our country dipped a little immediately thereafter, but it picked up in January; however, it now could be a question mark.

Behavioral Changes

After 9-11, exports of American travel (otherwise known as tourism) took a steep dive. Overall, it also  experienced compelling internal changes as well.

It took three years before American tourists got back to post 9-11 levels, but the growth has been staying local as non-North American travel hasn’t grown at the same pace of total tourism.

US Tourism Trends	Total	Overseas	Mexico	Canada
2000	60.9	26.9	18.8	15.2
2001	58.0	25.2	17.2	15.6
2002	58.1	23.4	18.5	16.2
2003	56.2	24.5	17.6	14.2
2004	61.8	27.4	19.4	15.1

Costa Rica, Anyone?

US Tourism Trends	Jamaica	Bahamas	Costa Rica
2002	983,000	796,000	398,000
2003	1,490,000	1,400,000	489,000

In 2004, Americans shifted back to favorite European haunts:

• Ireland +31%
• Italy +17%
• UK +14%

More recently, American tourists have flooded the world, including a monstrous surge to record levels last year where almost 74 million American tourists spent $132 billion dollars.

US Tourism Trends	Total	Overseas	Mexico	Canada
2013	61.6	29.0	20.5	12.0
2014	68.2	30.8	25.9	11.5
2015	73.5	32.8	28.2	12.5

Egypt’s Death Knell

While American tourists have gotten back out there, they aren’t going to Egypt; then again, neither are other tourists. Tourism bounced back after the Arab Spring, but it didn’t get back to prior levels.

However, if there was a chance for Egypt to get back to its 2010 level or reach its goal of 1,700,000 visitors by 2020, take a look (chart) at the free-fall after the Russian plane was downed.

Tourism is a major part of Egypt’s economy, which is fragile and teetering just as the government has been. ISIS sees the country as a would-be crown jewel in its ambition to create a caliphate. They took major steps toward that goal when MS804 vanished off the radar over the Mediterranean.

Today’s Session

I’m looking at mixed-signals from earnings, and I am still perplexed by the Fed and its newfound determination to raise rates.  When I hear them talk about validating their individual models, I fear its more ego than arithmetic at work.

Retailers keep missing:

• Footlocker (FL)
• Hibbett (HIBB)
• Shoe Carnival (SCVL)
• Ross Stores (ROST)

Deere (DE) beat the street, but everything was lower from top line growth to operating margins

• Revenue $7.87 billion -4%
• Op Margins:  Agriculture 10.7 from 11.1
• Op Margins: Construction 5.4 from 11.6

The bright spot in earnings is Applied Materials (AMAT), a company that’s underperformed for more than a decade.

There are half dozen names I’m so eager to feature, but I just can’t force the issue with the bias to the downside and a self-destructive Fed lurking in the wings.  On that note, we will add positions next week on weakness.  Someone said something about buying low once.

Comments

Some forecasters are saying: Gradual Rise to Terminal Rate of 3¼%. We continue to expect that the next Fed rate hike will be in June, with a gradual pace of tightening to a terminal rate of 3¼% after 2018. Can our economy handle that; probably. But the global situation with China, Venezuela, Brazil and Greece are much more fragile. Garro on 5/20/2016 9:48:35 AM

IF we had pro business policies and tax and regulatory cuts the Fed would return to important but not the top headline status. However, in the economies weakened condition to consider raising rates when we are still on the edge of falling back into deflation and with negative rates globally is not the most intelligent stance they have held. When will our economists and leaders we wake up that Keynesian economics will not work and that only fiscal policy can create incentive and stimulate growth. That is the investment we need to make! ray weldon on 5/20/2016 12:06:22 PM

Until a coalition of eastern and western European countries eliminate or dismantle terrorist groups in their region people will seek safer venues for vacation travel. There is plenty to see in the U.S. James Reed on 5/20/2016 3:21:37 PM

Hve not heard the details, only a brief synopsis of Trumps pro growth policies. They sound promising. Just a little concerned with his trade policies. Not enough to vote for Clinton or Sanders though. Paulette Whinnery on 5/20/2016 3:46:46 PM

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