What happened
Shares in aviation giant Boeing (BA 1.51%) fell by nearly 6% in early trading on Monday. The move comes down to a couple of connected reasons.
First, there's the broad market decline and the perception that Boeing is one of the companies particularly exposed to the risks that the market is concerned about right now. If it isn't the omicron variant impacting international air travel, it's the political tension over Ukraine. If it isn't fear of rising interest rates pressuring airline debt loads, it's rising oil prices threatening airline profitability. Meanwhile, China still hasn't fully approved the 737 MAX to return to service.
Image source: Getty Images.
Second, in an environment where the market is selling off risk assets, one of the last thing investors want to hear is the announcement that Boeing is investing a further $450 million in pilotless air-taxi company Wisk Aero, a company Boeing holds a majority stake in. Perhaps six months ago, the market might have become very excited by heavy investment in an electrical vertical takeoff and landing company developing autonomous air taxis, but not in the current climate.
So what
In a sense, Boeing's fall today reflects current sentiment more than reality. The recovery in air travel continues despite the ongoing pandemic. The tensions over Ukraine can be resolved peacefully. And China's aviation regulator has cleared the Boeing 737 MAX; hence, it's a question of when, not if, it returns to service in China.
As such, Boeing's stock is likely to be seen as one to avoid as the market prices in the risks discussed above, but also one to buy if those risks dissipate.
Now what
Investors in Boeing and the broader market will have to keep an eye on the headline risks discussed above and hope that at least some of them resolve in due course. If they do, then Boeing and other great aerospace stocks are likely to outperform.
