Last Friday we saw a knee jerk type of market sell-off following initial reports of the new Covid variant omicron. It was a large-scale worldwide stock market reaction which happened during Thanksgiving week when U.S. markets are traded very lightly and many big investors are out of town on holiday. Overall, it was a perfect storm for a volatile stock market reaction.
I believe any further market downturn from this Covid variant will most likely be of short duration – less than a month. Over the past two years investors and traders have learned that buying the pandemic driven drops are highly profitable. Panic selling is now quickly followed by panic buying and thus higher stock market prices. I also look at this type of event from a holistic viewpoint in which the world has allocated vast resources into fighting the virus and ever-expanding knowledge about it. Covid will be affecting all aspects of life for years to come but I believe there is a low probability of it pushing economies into another recession.
The status of the new Covid variant Omicron will probably be the biggest news story for the next few weeks and I’ll provide updates along the way.
Photograph by: Hakan Nural