Is Omicron the new Delta – and what does that mean to markets?

Robert Armstrong published this chart in this morning’s newsletter, it’s of the S&P 500’s progress and it shows the impact of the sell-off of energy and travel stocks on Friday.

Robert asks us to find the similar drawdown for the announcement of the Delta virus. The answer is under the “?” in the slide’s question, it happened in July. For most of us, the Delta drawdown is a thing of distant memory, now forgotten by a market that has moved on without a blip – till the Omicron announcement.

There are three reasons that Armstrong gives for us to believe that last week’s blip will be different from the Delta blip.

  1. American monetary and fiscal policy has changed (something that’s happening in the UK as well).
  2. We may be waking up to our not being in the Covid endgame but in the thick of what could be a long series of mutations
  3. That this mutation is genuinely fearsome and could plunge us back into lockdown.

I’m not qualified to comment on any of these questions, except as they touch my common sense. It does seem absurd and unfair for us to be blaming South Africa for giving us the variant when they simply gave us news of the variant. For all we know right now, we may have given South Africa the variant!

I know that the gravy train of loans and furlough payments has pulled out of the station, leaving a lot of debt both on Government and smaller corporate balance sheets. I also suspect that interest rates are likely to go up and that inflation is going up fast. This does feel different from July.

Common sense tells me that we are currently pretty careless. Even in our church service on Sunday, more than half the congregation weren’t wearing masks. At a pension conference during the week , the only people wearing masks were working for the hotel. If this variant is at work and super infective – it is likely to already be super-spreading and stopping flights in may be another stable-door moment.

But for all that, I suspect bond and commodity markets were spooked most of all because they have adopted a very aggressive position and expect daily good news. Life and markets are not like that.

In market terms, I hope that Omicron is the new Delta and we continue to see progress after the dip.

In health terms, I hope that Omicron does not cause the suffering of Delta and that vaccines work.

If the fear is that Omicron sidesteps the vaccine then I fear increasing vaccinations won’t work, but if  Omicron causes a longer term use of masks in public places (as previous pandemics did in the far east) then it will have a significant social impact whether it turns out to be as noxious as the WHO suspect or as mild as the South African medical authorities are reporting.

Either way, I am getting on with my week. It is Monday and we are getting towards the end of the year, there are targets to be hit!

a hard word to spell!

About henry tapper

Founder of the Pension PlayPen,, partner of Stella, father of Olly . I am the Pension Plowman
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