Should investors be worried about the Omicron variant and the stock market?

TThe omicron variant of COVID-19 has left the stock market in turmoil in recent weeks. While early data seems to show the variant is less lethal, the prospect of borders closing and restrictions being reinstated has caused some of the market to drop. In this segment of Backstage Pass, recorded on november 29, Fool contributors Jason Hall, Rachel Warren and Toby Bordelon discuss the market’s response to the news.

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Jason Hall: The omicron variant of COVID that comes from Africa. Guess it was half day Friday, the market closed early but fell sharply as investors were obviously worried about the potential implications of this variant. We learned a little more. We still don’t know exactly how virulent it is. What are the health risks ?

Is it less deadly? Is it a mild form of the disease? We are still learning that. There are indications that maybe it’s a little softer, but we really don’t know. Rachel, I think you shared this with us, that Pershing Square Was Capital Management boss Bill Ackman, famous investor, on CNBC? I think he was on CNBC.

Rachel Warren: Yeah, he was.

Room: He might have been the first person to say this, but I’ve heard this a few other times as well, that it might actually drive up stocks. The idea being, if it’s very contagious, if it’s more contagious than the delta variant, but less dangerous, if it’s a more benign form, it could become the dominant strain of this disease.

If that happens it would be a positive result because it will be closer to the flu or something like that. Investors could wire that up and say it’s great for the global economy and stocks could go up. I’m just going to press mute and let Toby speak here. I think this might be the best thing for me.

Toby Bordelon: Yeah. Look, I’m not really worried about the omicron variant, maybe I should be. I’m just not worried about this from an equities perspective, but I’m not sure news of a less deadly variant is going to boost the market, guys. I think what people really want is for the news of the coronavirus to be over for good. I think that would stimulate the market, if what we’re talking about is, oh we get this variant, but it’s not that bad, maybe, but I really don’t see that. But I don’t think this tank all alone. I don’t think it’s going to destroy the market.

I think today’s movement is proof of that. I think we’re done for the indexes today, if I’m not mistaken, maybe a little down. I don’t remember, but it wasn’t like an accident that people were worried about on Friday. Oh, my God, and then this weekend is going to turn everything upside down. Turns out no, not so much, at least that’s good news.

I want to say that in the end it will not be a big problem. Hopefully the news we get in the next few days is that it’s not fair, vaccines still work, infection immunity still works, and it’s not just a huge thing for the market.

Warren: I think we’ll find out a lot in the coming weeks. Obviously it takes time to collect this data to see if people are getting seriously ill? What do death rates look like? I keep my fingers crossed that this is all positive. I think part of that is definitely a lot of betting tips and that makes great headlines.

I think there was obviously a lot of panic in the market on Friday. I think you see some of that stabilizing today. I think part of this is that you have, for example, Pfizer came out and the CEO said they believed their new COVID pill could be very effective against omicron.

Pfizer and BioNTech are also working on a vaccine that would target this variant that would take several weeks to develop, then a few months to test. But that could mean that, if it was in fact a more concerning variant, you might have something that would be available targeted in the next few months perhaps. I think that reassures investors a bit today.

I think there’s really no way of knowing exactly what’s going to happen here. I’m hopeful, based on the data we have so far, that it won’t cause more serious illness, and in fact, I think if investors see this data it could be very good for the market in this direction.

Because there isn’t that much of a worry of global shutdowns again, and what that might mean for global economies. I really think it’s a bit of a waiting game. I know one of the things investors are concerned about is whether this could potentially lead to another correction, if it turns out that this variant is in fact causing more serious illness or has a potential impact on mortality. I’m not sitting worrying about the market right now. I am not changing my way of investing based on this news.

I think things definitely get a bit rocky if in fact it’s a more worrying variant. At the same time, I think we could potentially see, as Mr Ackman said, a real advantage for stocks if, in fact, we got more positive news.

I think the right thing to do right now is wait and see, keep investing in big companies that you want to hold on to for the long haul, and yes just sit there while we see what comes next.

Room: It’s a slow topical day, and I think it’s just Ackman who has time to cope. [laughs] I really mean it, I think that’s basically it.

Warren: May be.

Room: It’s history. It’s the week after Thanksgiving. Not much is happening. We’re at the end of the earnings season, CNBC’s fill time, Ackman is still looking to get on TV, whatever.

I guess there’s a part of me that’s like, if it’s something that helps the average investor who hasn’t really found the power to buy and hold for the long term and scale the position of assets and not having money you are going to need short term stocks anyway. For these people, if it helps them hold on, I love it, that’s just as good.

If it gets people to do the right thing for some stupid reason, because Ackman said so, that’s cool. I think the thing to take away is what I wanted to say is that it took me a long time to realize it is that I don’t care how specialized your knowledge is, how early you get them.

Computers have already taken it into account and evaluated it before you can even log into your brokerage account. By viewing these things as business opportunities, I think it’s too easy to fall into this trap. Don’t waste time, it’s my way of thinking.

I’m not going to waste the time that I could do something productive, whether it’s working on my disc golf game or as productive to invest, reading a 10-K from a company that I thought was interesting, and then I finally have 10 minutes now, I can start reading. Instead of trying to make the perfect trade on these things. I just think it’s one thing and it’s noise, and in theory I guess I get it.

I guess I get the idea that maybe it’s, maybe hospitalization rates are starting to go down, all the good points there. People are like OK, well, I’m gonna start traveling now. People who haven’t traveled before, people who still haven’t gone back to restaurants, back to bars, back to concerts, these things are starting to open up. But is it just a stock market affair or is it like a general economic recovery and is the world better off? This is just how I think.

Jason Hall has no position in the stocks mentioned. Rachel Warren has no position in the stocks mentioned. Toby Bordelon has no position in the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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