The sharp selloff that hit global markets Friday is easing, with stocks clawing back ground early Monday.
It’s too early to class Friday’s slump an overreaction but it may well have been a knee-jerk one, given the lack of information available about the new Omicron variant of the coronavirus that causes Covid-19.
We still don’t know enough to decide if this is a buying opportunity—one bad headline could well reignite the selloff. Yet a couple of developments appear to have eased fears for now. The World Health Organization cautioned against travel restrictions, recommending countries take a “risk-based and scientific approach.” The WHO also said there was no information to suggest the symptoms linked to the variant are any different from other strains. Health experts in South Africa have also described symptoms as mild.
Even in the event of a worst-case scenario—the variant proves to be vaccine-busting— Moderna said it could have a modified vaccine ready in early 2022.
That development, in particular, serves as a reminder that the world is in a far better place to cope with the pandemic than it was in March 2020.
Hedge fund manager Bill Ackman said if the Omicron variant does indeed prove to cause mild to moderate symptoms, even if it is more transmissible, that would be bullish for stocks.
He may well be right but for now that is a big ‘if,’ and one that is unlikely to be fully answered for at least a couple of volatile and uncertain weeks.