We knew omicron would be bad but seeing it up close highlights the two main risks I highlighted early in the outbreak are in play:
1) China
There's a growing outbreak in Hong Kong and officials are struggling in Xian. The hard lockdown there, where people aren't even allowed to get groceries, is unsustainable and cases are still over 100 per day. It's possible they eventually get on top of it but this won't be the last outbreak and omicron is so hard to stop.
2) Political fracturing
This is such a tough one to predict but the we're-all-in-this-together feeling is long gone in most of the world .The appetite for lockdowns and even moderate curbs is dwindling. There's a sense of hopelessness in fighting omicron. At the same time, healthcare systems are at the breaking point, which creates a political firestorm of its own. I don't know how this evolves but there's growing anger and desperation on all sides and that won't turn out well.
Right now we're seeing selling in commodity currencies. The early rally in oil has completely reversed and crude is down 55-cents. The US dollar and yen are strong.
Stocks are in positive territory so far but I'm skeptical that will last.
