The news surrounding Covid 19 sent shock waves through public health organizations and governments last week, and investors took a closer look at the new omicron variant of the Covid 19 on Monday.
Wall Street regained some of the ground it lost on Friday when all three major indexes plunged by more than 2 percent. The Dow Jones Industrial Average fell to 905 points, or 2.5 percent, its worst day of the year. The broad-based S&P 500 fell by 2.3 percent and the tech-dominated Nasdaq dropped 2.2 percent.
Greg Bassuk, CEO of AXS Investments, said Friday that Covid is still the investor narrative. He said that there was a lot of strength in the market up until last month or two, with strong corporate earnings and predictions of a robust holiday spending season.
The S&P rose by 1.5 percent on Monday, with investors seemingly reassured by President Joe Biden's remarks, which continued to emphasize the importance of vaccination and boosters. He said that the variant was a cause for concern, not a cause for panic and he did not expect to reinstate lockdowns in response to the emergence of the omicron variant.
Market observers said Friday's plunge was sentiment-driven rather than grounded in data. Mitchell Goldberg, president of ClientFirst Strategy, said that this was more of an emotional day. Since the epidemic, there are so many short-term craters in the market that are hyper-sensitive to every news that comes out. With stocks as expensive as they are, valuation ratios have become stretched, and concerns about asset bubbles suggested that a correction had been in the wings. Jeff Carbone, managing partner for Cornerstone Wealth, said the growth drivers may be waning, especially with everything that is happening.
It's looking for a catalyst, said Darren Schuringa, CEO of ASYMmetric ETFs.
Schuringa said that the virus remains the dominant factor in the course of the economic recovery, as has been the case for much of the time since March 2020. Friday was the catalyst again, and the new variant was just a reason for investors to run to the exits. Keith Buchanan, portfolio manager at Globalt Investments said Friday s rout was magnified by technical factors. A post-holiday lull in volume and a shortened trading day amplified the impact of rushed selling. He said that it was traditionally a lower-volume day, so there was a mad dash to a small exit. With the news about omicron coming so quickly ahead of a weekend, Buchanan said investors were facing the possibility of being exposed to any impending bad news.
He said that if you have a shorter trading day and maybe you have more risk than you re comfortable holding, the news flow on the virus doesn't stop on the weekend.
Since the start of the epidemic, there have been periods during which economic recovery seemed to be gaining momentum but stalled with the emergence of a new mutation. Buchanan said it was unsurprising that investors initially feared the worst. Delta was the last variant of concern, and Delta had a tremendous human toll, he said. Psychologically, the worst-case scenario is that we go back in time and people just disengage from the economy. The professionals say the message is two-fold: Don't panic, but consider this opportunity to evaluate your investment allocation and see if it aligns with your risk tolerance and wealth-building timeline.
Schuringa said retail investors have taken more risk in search of income. I think the takeaway for average savers is that they have to ask themselves, how do I de-risk my portfolio? Most investors are best off staying the course. The fear factor is still lingering and Goldberg warns that trying to time the market according to day-to- day news cycles can lead to big losses. We are living on a minute-to-minute basis. It's the worst way to make a decision. In the coming weeks, experts predicted that the market is likely to display more volatility, and said investors should focus on their long-term goals.
As we move into 2022, we are very bullish on the economic reopening, but in the immediate term we anticipate a period of volatility until there is more certainty with respect to the variant, Bassuk said. We are seeing that investors are looking for that market compass to land in a clear direction. There is still a lot of uncertainty, and it continues to be driven by more questions than answers.