UBS Manager Sees ‘Critical’ Weeks Ahead for Travel as Jet Fuel Costs Soar

As U.S. jet fuel prices have doubled since late February and American carriers face a market “roller-coaster,” UBS managing director and senior portfolio manager Jason Katz says the next few weeks will be critical in determining whether the travel sector’s resilience can hold.

United States government data show that airlines spent over $5 billion on fuel in March alone—a 30% jump from a year earlier. Since the start of the war, Alaska Air has led declines among carriers, down 21%.

Yet consumers, so far, are still booking trips. “Watch what the consumer did not say this quarter—17% year-over-year growth. The consumer has been voting with their feet and spending,” Katz said.

However, he warned of a “boy who cried wolf scenario” with the Strait of Hormuz. “If energy stays elevated for a prolonged period of time, once we get past the benefits of the million little things and tax cuts, they will take a hard look and say, maybe I should not take that flight, or not buy that pair of speakers,” he added. “The next few weeks are critical in seeing the straits open.”

Despite the turbulence, Katz sees broader market opportunities for investors willing to look beyond the conflict. He noted that the S&P 500 is off record highs, with markets projecting well beyond current events.

He stressed that market breadth remains exceptionally narrow: only 22% of companies have beaten the S&P benchmark—the worst underperformance for the rest of the companies in over 30 years. “There is good reason for enthusiasm,” he said, but added that he believes a broadening will eventually come to fruition.

Katz pointed to reasonable unemployment, GDP growing above trend, and anticipated Fed cuts as supportive factors. “I do think that the Strait of Hormuz will be open in time. I think we’ll continue to see earnings growth for the year could be north of 15%—and some are calling for 20%.”

For investors, Katz recommends buying what has been left behind: “You buy things that were left behind, whose valuations are rationale—financials, energy, infrastructure, through the way of industrials, health care.” He noted these sectors trade at a 25% discount to the S&P, yet are expected to grow earnings at 16%—creating a disconnect.

Specifically on healthcare, which has underperformed, Katz sees an AI catalyst. “My clients in the medical world are jumping out of their skin. They are so excited,” he said. “Looking at valuations and the disconnect and AI as a catalyst, you need to consider having money there.”