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Forget Brexit, Celebrate July Fourth with These ETFs

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Americans seem all set to celebrate Independence Day by vacationing hard over this weekend. As per the AAA survey, about “43 million Americans will travel from June 30 through July 4”, trumping the 11-year high Memorial Day travel by nearly 5 million more travelers. Obviously, with this, it will hit a record this holiday weekend.

And this makes sense especially in an economy which is on the mend. Improving wages and still-cheaper gas prices will give Americans the freedom to splurge on discretionary activities.

Despite the recent gains in oil prices, the level isn’t so high that inhabitants will cut back on traveling. AAA indicated that “drivers have already saved $20 billion on gasoline this year compared to 2015.”

People spend their summer holidays vacationing by road or air. So transportation stocks and ETFs become the largest beneficiaries of the travel trend.

Travel Modes in Detail

As per the AAA survey, 84% of Americans will hit the road thanks to the cheapest holiday weekend gas prices in 11 years. The figure is up 1.2% year over year. The source indicated that the national average price for a gallon of gasoline is 47 cents lower year over year. As far as air travel is concerned, there will be a 2.2% surge year over year.

Considerably lower average airfare must have heated up air travel this year. Also, European travel is likely to be in vogue courtesy of the falling pound and euro in the Brexit aftermath. CurrencyShares Euro ETF FXE lost over 2.5% in the last five days and CurrencyShares British Pound Sterling ETF FXB plummeted over 9.8% during the timeframe (as of June 29, 2016) (read: Pound ETF Plunges: More Sell-Off in the Cards?).

What is Driving the Surge in Travel?

After all a lull in Q1, the U.S. economy is likely to take root ahead as evident by the recent pool of economic data. Yes, job growth decelerated lately, but that did not overshadow the other strong economic data points, making people more confident about economic wellbeing.

And since no vacation is complete without eating out and shopping, the entire July Fourth celebration has put cyclical sectors like automotive and consumer discretionary in play.

Below we highlight a few ETFs that stand to gain on fourth of July travel.

Transportation ETFs

These ETFs offer exposure to railroad, air freight & logistics, trucking and airlines. Choices are (read: Burst of Earnings Surprises Fails to Drive Transport ETFs):

iShares Dow Jones Transportation Average Fund IYT

SPDR S&P Transportation ETF (XTN)

Airline ETF

U.S. Global Jets ETF JETS

This fund provides exposure to the global airline industry, including airline operators and manufacturers from all over the world (read: 3 ETFs & Stocks to Fly High on Busy Summer Travel).

Leisure and Entertainment ETF

PowerShares Dynamic Leisure and Entertainment Portfolio (PEJ)

The fund gives exposure to a broader array of leisure and entertainment stocks that include restaurants, cruise companies, airlines and leisure travel companies. The 30-stock fund’s top three holdings are Yum! Brands, McDonald's and CBS Corp.

Casino ETF

VanEck Vectors Gaming ETF (BJK - Free Report)

With Las Vegas being one of hot spots in the Fourth of July getaway list, Las Vegas Strip – a wing clustered with resort hotels and casinos – should be very much in focus. Investors should note that several casino stock constituents of BJK are located in the Las Vegas Strip and thus are expected to score higher.


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