almost 3 years ago • 3 mins
Virgin Galactic’s successful test spaceflight at the weekend was one small step toward its real ambitions, but it led to one giant leap for the space tourism company’s shares on Monday.
What does this mean?
After back-to-back delays, investors were starting to have their doubts it’d ever happen. But this long-awaited trip into space – and the company’s first rocket launch in two years – has well and truly put Virgin Galactic back on its flight path toward space tourism.
All the company needs to do now is complete two more test flights and get a license from the US Federal Aviation Administration, both of which it thinks it can do by next year. If it does, it’ll be all set to start offering flights to paying customers. And with that prospect on the horizon, investors initially sent its stock – *resists urge to make “to the moon” joke* – up 20%.
Why should I care?
For markets: Expensive thing, space travel.
Still, the jump in Virgin Galactic’s share price doesn’t make up for the two-thirds of value it’s lost since its peak in February. Some investors might argue the stock’s just a bit too dicey right now: it’ll be years before the company starts to make meaningful profits, despite already having earned $85 million in deposits from tickets starting at $200,000.
For you personally: Space ETFs are stretching the definition.
The promise of a sci-fi future has got investors giddy with long-abandoned schoolkid fantasies, so it’s a good thing there are now several space-focused exchange-traded funds (ETFs) out there. Then again, there aren’t exactly many firms in the sector to invest in, with other high-profile names – like Jeff Bezos’s Blue Origin and Elon Musk’s SpaceX – still in private hands. So it’s worth being aware that the ETFs have a much broader – and pretty tenuous – scope, tracking everything from robotics to satellite communications firms.
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What does this mean?
Between strong demand on the back of the global economic recovery and supply issues on the back of that strong demand, commodity prices have hit their highest levels in almost a decade. And that’s not cool with China, which is by far the biggest consumer of raw materials in the world.
The government, then, is in damage control mode. It summoned the top execs from the country’s metal producers to a meeting on Sunday, and made three demands of them: no colluding with one another to manipulate prices, no spreading misinformation about levels of supply and demand, and no hoarding materials to drive up prices. Investors, at least, got the message loud and clear: prices of commodities including iron ore, aluminium, and steel initially dropped on Monday.
Why should I care?
The bigger picture: Who isn’t afraid of inflation?
There’s a reason China’s so nervous. If the prices of commodities climb too high, it’ll push up manufacturers’ costs and, in turn, encourage them to charge customers more for the finished products. That climb in prices – i.e. inflation – could put customers off spending their money, which would be bad news for economic activity and, in the longer term, China’s economic growth.
For markets: Long live the underdog.
Commodity prices might be surging, but they’re still trading at their biggest discount to stocks on record. At the same time, they’re actually well-positioned to close that gap and overtake their higher-profile counterparts. See, if inflation edges up too high, too quickly, the world’s central banks might hike interest rates in a bid to cool down the economy. And since stocks are vulnerable to higher interest rates, investors could ditch them in favor of commodities – and looking at the recent tech sell-off, that might already have started happening.
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