There are all kinds of numbers and studies daily on omicron but I've seen enough to be confident in two things:
- It's far more transmissible than any other variant
- It's not as severe, though how much so remains to be seen
At this point it looks like virtually everyone will be exposed to it and case numbers will hit records almost everywhere. It could be a rough ride for everyone and there will be virus curbs in most countries with inevitable knock-on effects on growth.
All that said, there's one thing the market is focused on and I think it's all that matters: In six months, omicron will be done. It will have spread so far and wide by that point that it will flame out, probably sooner.
Could it morph into something else? Certainly. But there's a better chance it will enhance everyone's immunity, making future waves less damaging.
The market has shown a remarkable ability to look through a rough patch and that is what is going to happen once again, no matter how bad this wave gets.
So pile into risk trades? I'm not so sure. Valuations aren't cheap in equities and rates are going up. We're also perilously close to year end plus I worry about selling in high-flying tech early in 2022 for tax reasons.
Mostly though I'm worried about China. The rules around covid and omicron are different there. There's virtually zero natural immunity and the sinovac vaccine might not work against omicron. Moreover, there is a serious risk of severe lockdowns that cripple the domestic economy and global supply chains.
