As reported in a recent article published by Bloomberg, the leisure sector of the high-yield market has experienced a recovery from its pandemic-era challenges. This is generally attributed to an increase in vacation spending and greater demand for travel—particularly, in the cruise industry.

Riding the Wave

According to data compiled by Bloomberg, the leisure sector has outperformed all other high-yield market segments and the asset class overall this year. During this period, many cruise operators issued debt in the high-yield bond market to help fund business operations.

The recovery comes as COVID-related restrictions have eased, along with growing confidence that the Federal Reserve may be able to successfully execute a so-called “soft landing” for the U.S. economy. This has inspired consumers to resume travel activities, particularly via the cruise industry. It is a welcome development for the leisure sector, which was significantly impacted by the global pandemic.

A Shift in Consumer Sentiment

David Schiffman, Lead Portfolio Manager of Aquila High Income Fund, was referenced in the article to address consumer preferences. Mr. Schiffman believes that consumer spending has generally shifted somewhat from goods, in favor of more discretionary spending, such as leisure. He cited an underlying sentiment on the part of consumers who are seeking to venture out, embark on vacations and resume traveling. It will be interesting to see if this momentum continues for the rest of the year and into 2024, but the current trend is encouraging.

 


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