Brexit has had a big impact on the UK stock market, and the biggest casualties have been the manufacturing sector and the travel industry. Unfortunately, aerospace stock falls right in the middle of that Venn diagram, affected as it is by the cost of specialized equipment and building materials, as well as the demand for travel.
Add to this the ever-rising cost of aeroplane fuel, as well as escalating strike action among airline workers, and aerospace stock is beginning to feel like a risky place to keep your money.
So should you stick with aerospace stock?
Later this week, British Airways’ parent company International Consolidated Airlines Group (IAG) will reveal its first-quarter trading figures, and finance experts will be looking out for signs of long-term trouble at IAG and the aerospace industry as a whole.
In February’s final year results, IAG warned that profits were likely to be flat for the rest of the year, but that was before the Brexit extension was announced, raising hopes of a surge in summer bookings.
Beyond IAG, there have been signs of trouble at other aerospace stalwarts. Ryanair’s stock price has recently dropped to a 2-year low, while a series of crashes and allegations of mismanagement have seen Boeing’s stock plummet since the beginning of the year.
So is it really time to dump your aerospace investments, or does the current downturn represent an opportunity to buy them cheap?
The jury is still out on this, unfortunately. Day traders do have a chance to capitalize on low stock prices in the short term, but this is a risky move considering the very real threats that face airlines and aerospace businesses in the year ahead.
However, as some analysts have pointed out – stock performance in the aerospace sector has not been as bad as it could have been in recent months. In fact, the vast majority of analysts have listed both Boeing and IAG as ‘buy’ stocks – largely due to an increase in defence spending is up in the US and the UK.
Realistically, the aerospace sector is not going to go bust in the near future, but some companies are in a stronger position than others. As ever, diversity is the key, but choose your stocks wisely and you could make considerable gains while avoiding big losses.