The Covid-19 virus continues to mutate and occasionally causes new variants to occur. As the virus mutates further and further away from the parent Wuhan strain, there are the risks of more aggressive viruses, strains that are not treatable by current medications and regimes, and variants that are not affected by current vaccines. So far the new Omicron variant appears to spread more easily than previous strains but does not seem to cause more severe disease. It will take a few weeks to find out if current vaccines are effective against the Omicron variant. What does all of this say about the Omicron variant and your investments?
What Is the Omicron Covid-19 Variant?
The World Health Organization provided an update on Omicron on November 28, 2021. They designated Omicron a variant of concern because it has several mutations that may affect its ease of transmission and how sick it will make people who catch it. They are concerned that people who got previous strains of Covid-19 and recovered could more-easily catch the Omicron variant. Regarding transmissibility, severity, and vaccine effectiveness the jury was still out when they issued the update. But, in the last few days the virus has been identified in more than twenty countries and it has become the dominant strain in South Africa where it was first identified. So far in South Africa it does not seem to be making people any sicker than previous variants and folks who have been vaccinated seem to have protection although how good that is will need to be found out.
How Will the Omicron Covid Variant Affect the Stock Market?
So, we have another (predictable) Covid-19 variant. Experts have been saying that the pool of unvaccinated people due to vaccine hesitancy and simply the lack of vaccines in many regions of the world have created a situation where repeated variants are likely to arise. Each time this happens there is the risk of renewed damage to the economy and individual investments. How any of this relates to the Omicron Covid variant and your investments will likely depend on what you are invested in. The Motley Fool looks at how Omicron will affect the stock market. The 2020 Covid Crash happened because the economy shut down and because nobody had a real clue about how the pandemic would work out. After the initial plunge we saw a K-shaped recovery with tech stocks booming while travel and hospitality stayed weak or even worsened. Because everyone has now seen this playbook we might expect a similar scenario if Omicron surges due to greater transmissibility and severity as well as not being preventable with vaccines. Because everyone has seen the playbook we would not expect a crash of the market simply based on Omicron being worse than currently expected. But, there are more factors to consider.
Omicron and More for Investors to Worry About
The world and national economies were functioning normally before the Covid Crash. Today we have inflation worries, the risk of a real estate meltdown in China, and supply chain disruptions with computer chip makers making it hard for automakers to meet their production quotas. The Fed is talking about accelerating the processes quantitative easing and, perhaps, raising interest rates sooner and higher than previously expected. The risks of one or more of these factors added to an aggressive new Covid-19 variant are real. Many will chose to take some profits out of the stock market just in case. Then the problem is that still-low interest rates offer the prospect of investing with negative real interest rates for now and the prospect of 1970s stagflation on the other.
Intrinsic Value in the Era of Covid-19
In the USA and other nations herd immunity from high vaccination rates is theoretically possible. But, it would take a huge change in the mindset of a large segment of the population and, more importantly, lawmakers and the courts for this to be achieved. Then the issue is vaccinating enough folks across the world to reduce the load of the virus to a point where new variants are less likely to emerge. It would appear that the pandemic that we all thought would go on for a year or two may well be a permanent human condition. That being the case, how do you assess intrinsic value in the era of Covid-19? The necessary clue is contained in the tech rally from the depths of the Covid-19 Crash. Microsoft, Apple, and Alphabet are not the only possible investments in this case. The world is going to be producing more and more electric vehicles that will need lithium batteries and lots of strategic minerals. Tech and all of its support aspects are in all likelihood where to find intrinsic value as the Covid-19 pandemic becomes a permanent part of the human condition.
Omicron Covid Variant and Your Investments – Slideshare Version