- Investors are scrambling to work out what the new Omicron COVID variant means for the economy and markets.
- Global investment banks have told clients to brace for volatility in stocks, but so far seem cautiously optimistic.
- The Omicron variant sent stocks and oil tumbling Friday, but markets rebounded Monday.
Investors around the world are scrambling to work out what the discovery of a new, highly mutated coronavirus variant might mean for the global economy and markets.
So far, there’s not a huge amount of information on whether the Omicron variant is any more dangerous or transmissible, although reports from southern Africa have said so far many people have only mild symptoms.
Omicron caused stocks and oil to plunge Friday, although they both rebounded on Monday.
The recovery appears to reflect the noises coming out of the world’s top financial institutions, with many analysts sticking to relatively upbeat forecasts for US and global stocks, while telling clients to brace for more volatility in the coming weeks.
Here’s what Wall Street strategists and economists are saying.
Markets shouldn’t jump to conclusions
Mark Haefele, chief investment officer at UBS Global Wealth Management: “We share the markets’ concern over the emergence of the new variant and will monitor developments closely. But we advise investors against jumping to conclusions based on small data samples and anecdotal reports with potentially large margins of error.
“We advise against hasty shifts in investment strategy and recommend staying invested.”
Christian Keller, head of economics research at Barclays: “Answering [key] questions [about Omicron] may take weeks, which could mean elevated uncertainty for the remainder of the year.
“One worst-case scenario involves the entire immunization process having to start from scratch, while the most benign outcome would be the discovery that ‘Omicron’ is neither much more transmissible, nor deadly than earlier variants and that existing vaccines are effective against it.”
The US economy is relatively resilient
David Kelly, chief global strategist, JPMorgan Funds: “The economy should enter 2022 with a tailwind of strong wage growth, falling unemployment and huge gains in asset prices.
“This week’s economic reports, and particularly Friday’s jobs report, should provide further evidence that the economy is gathering momentum in the fourth quarter.”
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Volatility is likely to stick around
Chris Harvey, senior equity analyst at Wells Fargo: “Panic does not disappear overnight. When the market decides to ‘shoot first, aim later’ (even if the catalyst proves to be ephemeral), the sharp reaction suggests stress levels will take at least 1-2 weeks to decay.”
Michael Strobaek, global chief investment officer, Credit Suisse: “Market volatility is likely to persist until more facts about the new COVID-19 variant are known.
“At this point, we reiterate our assessment from the latest Investment Committee report, i.e. keeping equities at a small overweight in portfolios and government bonds at an underweight.”
Omicron to boost ‘growth’ and hurt ‘value’ stocks
Lori Calvasina, head of US equity strategy at RBC Capital Markets: “The main risk we see today is that the intermediate-term bout of leadership in Value, Cyclicals, and Small Cap [stocks] we’ve been waiting for may be on hold.
“Growth, Secular, and Large Cap have tended to outperform when the rate of change in domestic COVID-19 is worsening.”