As more cases of the Omicron variant of the CCP virus are reported in the United States, the stock market has suffered a stark decline as investors fear that the disease will prolong restrictions on travel and commerce. However, at least two high-profile individuals see Omicron as a cause for optimism: JPMorgan strategists Marko Kolanovic and Bram Kaplan.
In a note to clients, JPMorgan strategists conveyed that the market turmoil caused by the emergence of Omicron in the United States was misguided and presented an opportunity for savvy investors to buy the dip in anticipation of a future recovery.
“Over the last several days markets have been in turmoil over the new COVID variant Omicron. However, data on Omicron is sparse, information contradictory, and some media has been exaggerating risks and highlighting worst-case scenarios,” said the strategists.
“Omicron could be a catalyst for steepening (not flattening) the yield curve, rotation from growth to value, selloff in COVID and lockdown beneficiaries and rally in reopening themes. We view the recent selloff in these segments as an opportunity to buy the dip in cyclicals, commodities, and reopening themes, and to position for higher bond yields and steepening.”
Furthermore, the strategists suggested that particular features of the Omicron variant qualify it as an unexpected sign of hope for an imminent transition to a post-pandemic world. Because the variant is high in contagiousness but lower than other strains in severity, it suggests a near future wherein the CCP virus evolves into an endemic disease similar to the seasonal flu. If this pattern holds, it may be a silver lining for the future of the disease, facilitating the long-anticipated return to normalcy.
These remarks are not unprecedented for at least one of the authors, Kolanovik, who has consistently been bullish on recovery from the CCP virus. Last summer, he cautioned against perceived alarmism at the Delta variant, suggesting that vaccinations were sufficient to prevent against market calamities. Kolanovik is a widely trusted and prestigious source on such matters, dubbed “The Man Who Moves Markets” by CNBC.
On Monday, President Biden addressed the Omicron variant in a meeting with industry leaders. During the meeting, Biden said the variant is “a cause for concern, not a cause for panic.” As uncertainty persists and America prepares for an uncertain holiday season, only time will tell the impact of the variant.