Since last Friday, the new strain of COVID-19 “omicron” has been the main topic of discussion in the stock market. CNBC interviewed major banks and found out, what is the risk?, in their opinion, carries "omicron" for investors.
Many learned about the strain 26 november, when WHO convened an urgent meeting. According to the organization, not yet known, how vaccinated and recovering from COVID-19 people are resistant to a new version of the virus. It can be much more contagious compared to other strains, so the WHO called the risk of global spread of "mikron" very high.
On Friday, on such news, stock indices S&P 500, Nasdaq and the Dow Jones fell by about 2%. Stocks of companies sensitive to quarantines fell more than others. So, shares of air carriers American, United and Delta hit 8-10%, cruise companies Carnival and Royal Caribbean - by 11-13%.
Investors began to sell risky assets like stocks and cryptocurrencies and buy bonds. As a result, the yield on 10-year Treasury bonds fell from 1,65 to 1,5%.
One of the few growing companies was Moderna, which promised to develop a vaccine against "omicron" early next year. The company's shares for two trading days rose by 35%.
Monday morning stock market began to recover. U.S. President Joe Biden said, that he will not impose restrictions in connection with the new strain. By the end of the day&P 500 added 1,3%, Nasdaq — 1,9%.
Despite recent growth, markets remain volatile. The head of Moderna said, that existing vaccines may not be as effective against omicron. As a result, on Tuesday, futures for the Dow Jones index fall on 1,5%, S&P 500 - on 1,2%, Nasdaq - on 0,7%.
And here is what leading Wall Street investment banks and ordinary investors say about this situation.
Goldman Sachs
In the worst-case scenario, Omicron will be more infectious and resistant to vaccines. This could trigger a new wave of illnesses in early 2022, but won't change in the long run: “We do not change our forecast until then, until such a scenario becomes more likely.".
Wells Fargo
Probably, new strain will exacerbate supply disruptions and slow workers back to the office. Investors should not make investment decisions in a hurry: “We do not recommend getting rid of risky assets”.
Swiss credit
Should stay in promotions, because markets can turn around quickly: "The number of unknowns is still high.. Our assumption is, that vaccines will retain some efficacy. To collect all efficacy and mortality data, would need, probably, Two weeks. In our opinion, uncertainty will lead to a temporary drop in prices. In recent 18 Months of concerns were short-lived. So, alpha-, beta- and delta strains caused very short-lived sell-offs.”.
RBC Capital Markets
Omicron will affect sectors of the real economy, and also encourages investors to pay attention to large companies: “Trading volume was light on Friday, but the reaction of the markets showed serious concerns”.
Deutsche Bank
Volatility could rise in the coming weeks, although statements by vaccine manufacturers will help limit the fall: “There are a lot of comments in the media, but little real data. Market reaction on Friday shows, that they will be highly sensitive to any news”.
UBS
New COVID-19 Variant Could Force FED review their plans to roll back stimulus measures: "Given the known information, we continue to look forward to a strong recovery in the global economy. Omicron should also ease investor concerns about early monetary tightening.”.
Citi
Investors should think about, to redeem the last fall: "Given all the concerns, negative news and continuous growth of stocks, sale seems logical. However, we do not expect a bear market and will buy all drawdowns.”.
What investors themselves think
Deutsche Bank surveyed about 1.5 thousand customers. Only 10% investors called "omicron" "the biggest risk". 60% consider the strain a "topic of medium importance", and 30% expect, that the new virus will soon be forgotten. According to the bank, investors are not tuned in to negative news. This could lead to a sale., if there is a lot of such news, consider in the bank.
In the situation with "omicron", which threatens to quarantine and shut down the economy, most interesting is the Fed's reaction. Early stimulus cuts could hurt economic recovery as well, and in the stock market. But the soft policy will continue to disperse the already high inflation.
THE US Bureau of Statistics will publish data on the consumer price index 10 December, and a few days later, 14—15 декабря, The Fed will hold its next meeting.
