On Black Friday: Panic
There's nothing like inserting a negative macro catalyst into holiday-thinned Friday trading to shake things up.
Panic swept across risk assets following the Thanksgiving holiday in the US, as concerns over a new COVID variant prompted the UK, Israel and Singapore to restrict travel from South Africa.
The B.1.1.529 variant boasts more mutations than previous strains and scientists are attempting to discern whether it's more transmissible. It's the dominant strain among new infections in South
China has been at war with the virus while the West has been attempting a peace with it. Supply line bottle cap may happen.
Last year I said I felt like Covid would be with us for the long term and it keeps proving me right. Regardless, the quote “it will go away like it never even happened” seems like it needs to remind those who want to re-elect a guy who’s name rhymes with dump. Instead we are looking at possibly the worst pandemic since smallpox.
Unless the whole world is vaccinated, which is difficult to imagine, then we will be faced with new mutations going forward indefinitely.
This is not a surprise. This is what viruses do.
With that said, each new variant won’t necessarily be as deadly as the prior variants. Some immunity has been established now — both from vaccinations, as well as from actual infection.
If, for some reason, the CDC decides that a new updated vaccine is necessary, let’s hope that this time we don’t see the same tired nonsense about how the vaccine is more dangerous than the virus.
Vaccination is a team sport. It works much better if everyone contributes.
Incidentally, the time from development through testing approval, production, and distribution, are all much reduced with a new vaccine, versus the original.
Well I bet we won’t hear all the braying from the peanut gallery (Wall Street) about how behind the curve Powell is – at least for a day. The wisdom of starting the taper but not in a rapid fashion is there for all to see. The Fed could still end up behind the curve- the point is that nobody really knows and taking measured steps, at least for now is the right approach. They can always accelarate things if this turns out to be a false alarm. But this event shows that a lot of things can happen to trip up the market and policy.
excellent comment!
Not what one really wanted to see on the wires last night. My quick thoughts:
New virus variant (“nu”?) is probably more transmissible than Delta, as it has rapidly become dominant in S Africa, but relative severity of disease is unknown. Existing mRNA vaccines likely have diminished but still substantial efficacy. If clinical trials start for new vaccine versions, obvious major -ve and +ve implications. The leading monoclonal antibody cocktails are likely lose efficacy against new variant, two less-used mAb are likely to retain it. The new oral antivirals are likely equally effective vs new variant as vs existing variants, as their mechanism is not immunologic. Countries that secured large orders of those will be advantaged.
I think reaction to new variant is will differ considerably by country and region. China is likely to close up further, as its homegrown vaccines will prove very lacking and CCP knows it. Asia ex-China’s “re-opening” may be slowed/postponed. Europe was already tightening restrictions, EMs probably can’t afford to. As for US, my guess is that government and consumer response won’t be a drastic as today’s stock moves imply. US has secured orders for near-term delivery of about 13MM courses of oral antivirals, ample supply of vaccine, and likely some dibs on new vaccine versions. Politically, returning to broad “lockdown” will be very difficult if not impossible, especially in mid-term year. And of course, to the extent “nu” sends market running back to mega and stay-home tech names, that is +ve for US makets.
The window for a December rally seems increasingly narrow. Is Santa going to thread the needle between nu and debt ceiling, or between debt ceiling and year-end? I’m still in de-risking mode.
You definitely used “better words” than I would have, but my immediate take is pretty similar in regards to the threat caused by the new variant (apparently now named Omnicron). However, I think all that leads to a minimal impact on the US economy and Mr Market will remember that bad news is good news (especially in regards to Fed actions) over the weekend and the algos will get adjusted as such. The Santa rally will ensue as soon as Monday through OpEx mid-Dec, rubber band like. Post OpEx, that’s a whole different ball game.
In case it’s not clear, “You” is meant to reference jyl
I wouldn’t dismiss the China re-opening slowing/postponing/shutting down further as a nonstarter vis a vis the United States economy. For all the bellyaching about the Fed (of which I have been vocal) the inflation problem definitely will not get better if supply chains are further constrained. While further Fed intervention may be great for markets it’s not going to do anything to help with global supply chain problems and will have little to no impact on an inflation problem that was already being recognized as longer term. Unless the Fed specifies that further aid must be put speicifically towards onshoring manufacturing I expect we’ll see more stock buybacks and bonuses. But I definitely agree that the United States will not shutdown no matter how bad Covid gets again because that would be political suicide. So it’s back to staring at Covid dashboards and hearing about anti-vaxxers dying in droves waiting in line for the emergency room again.
Thankful for the ‘Black Friday’ sale on US equities. If we get a ‘Cyber Monday’ sale, too- all the better.