For decades my specialty as an analyst has been aerospace/defense, of which a major component is the commercial airline industry.

Years back, during a cocktail party (remember cocktail parties?) at the Paris Air Show, an airline industry executive told me the following on condition of anonymity. I’ll never forget his Champagne-lubricated candor:

“The airline industry heaps misery on executives, workers, passengers, and shareholders. Fixed costs are high, profit margins are razor thin. It’s a constant battle to control labor and fuel costs. Passenger demand is fickle. It’s a cyclical business, given to extreme booms and busts. Job insecurity is high. Just ask the poor sods who used to work at Eastern, Pan Am, and Braniff.”

I’ve been thinking of those words lately, as the airline industry grapples with the COVID-19 crisis. Many analysts expect a major airline to go bankrupt in the coming months, as the pandemic weighs on passenger demand. But I’m not so sure.

In recent weeks, air travel has bounced back. The airline industry is an economic bellwether whose fortunes affect the wider economy and stock market. It’s a good sign for the economy that the airline industry is defying the pandemic and showing signs of life. But the rebound in air traffic could pave the way for later problems.

The United States represents the biggest air travel market of any single country, with about 926 million passengers transported in 2019. Because of the lack of ultra-fast rail transport in America, airlines play a vital transportation function for individuals and a wide range of industries. Air cargo is a leading indicator and its activity has recently risen off pandemic lows.

Air transportation’s recovery is part of the economic optimism that has been fueling a post-election stock market rally. To be sure, stocks took a breather Monday. The Dow Jones Industrial Average fell 271.73 points (-0.91%), the S&P 500 slipped 16.72 points (-0.46%), and the tech-heavy NASDAQ shed 7.11 points (-0.06%).

However, although it ended on a sour note, the past month was stellar for stocks. The Dow soared nearly 12% in November, its best month since January 1987. In pre-market futures trading Tuesday, all three main U.S. indices were sharply higher.

Gaining altitude…

According to the International Air Transport Association, airlines globally are projected to lose a record $84 billion in 2020, more than three times the loss incurred during the Global Financial Crisis of 12 years ago.

Year to date, the industry benchmark exchange-traded fund U.S. Global Jets ETF (JETS) has generated a return of -28.33%, compared to a return of +14.54% for the S&P 500 Index (as of market close Monday). However, JETS has risen in recent weeks, over signs that perhaps the airline industry isn’t as moribund as feared.

Read This Story: Are Airline Stocks Taking Off Too Soon?

Amid the “third wave” of the pandemic, health officials advised Americans against traveling during the Thanksgiving holiday. But true to our nation’s contrarian spirit, travel spiked anyway. Take a look at the following chart, compiled with data from the U.S. Transportation Security Administration (TSA):

To be sure, the 2020 Thanksgiving holiday air travel numbers are far below those recorded last year. However, they’re still considerably higher than during the initial stages of the pandemic, when total daily volume hovered at 100,000. The TSA announced yesterday that last Sunday was the busiest day of air travel in the U.S. since the pandemic low of mid-March.

What does the unexpected surge in airplane travel mean? It’s a good news/bad news scenario. Americans are eager to get back to normal and the airline industry is reaping the benefits. However, heavy traffic during the Thanksgiving holiday will probably result in a surge of new COVID-19 cases and deaths in the coming weeks, which in turn would cause further economic damage.

Hopefully, the imminent arrival of safe and effective vaccines will stem the pandemic’s tide and help shore up the markets.

Watch This Video: Does The Rally Have Legs?

Another positive factor is the prospect of massive fiscal stimulus in early 2021. The incoming Biden administration has vowed to ask Congress for major coronavirus relief legislation. I expect stimulus to eventually pass, regardless of which party controls the Senate.

My hunch is that a lot of the partisan rancor we’re currently witnessing will dissipate after inauguration day on January 20. Take it from me, a guy who used to work in Congress: memories in Washington are very short. What matters is power. Today’s hot political controversy (e.g., contesting the election results in Georgia) is tomorrow’s trivia question. As an investor, keep your eye on the long game.

Fiscal stimulus would put money into the hands of consumers, which they could use to buy discretionary items such as plane tickets. A relief bill also would probably entail a multi-billion-dollar subsidy for the airline industry, which has been lobbying lawmakers for help. A recovering air transportation sector would lift the broader economy.

Commodities, for growth with a hedge…

I’m bullish over the stock market’s long-term prospects. Green shoots of growth should appear in the spring of 2021. However, while we struggle with an uncertain winter, make sure your portfolio is diversified. One asset class that investors often ignore: commodities.

The trends that I’ve just described are a tailwind for commodities prices. When the global economic engine starts humming again, demand for raw materials will outstrip supply, especially in developing economies.

A return to robust global economic growth next year would be particularly favorable for copper. A wide range of industries and products can’t function without the “red metal.”

Copper prices already have risen about 70% since their bottom in March and they’re on track for further gains in 2021. That’s great news for investors who seek a growth opportunity that performs double duty as a hedge.

Commodities prices tend to rise faster than inflation, which could rear its head due to aggressive monetary stimulus. For our favorite investment play on the crucial commodity of copper, click here now.

John Persinos is the editorial director of Investing Daily. You can reach John at: mailbag@investingdaily.com. To subscribe to his video channel, follow this link.