On Friday morning, when it became clear that the market was going to get absolutely shellacked (read: only 2% off all-time highs) due to scary sounding headlines about the "Omicron variant" of Covid coming out of South Africa, I predicted that one way or another, we were going to head back to all time highs.
Here’s my wild-ass guess at the path this new variant is going to take us: more than likely back to all time highs, but not before we hit some (potentially large) bumps in the road first. While I happen to think this will be the Delta variant part 2 (in that it drums up a lot of hysteria and then everyone eventually ignores it), that doesn’t mean the government and markets won’t overreact to the news.
Over the weekend, several headlines broke indicating that the Omicron variant likely isn't going to be of major concern. One headline from Bloomberg on Sunday called it "pretty mild" and said that South Africa wasn't seeing a rise in hospitalizations.
There's no doubt that the more information that was revealed over the weekend, the more indications we got that we are likely in for a risk-on rally on Monday.
But what remains up in the air for me is whether or not the Fed uses the Omicron variant as an excuse to slow the taper and/or push back rate hikes. Market expectations on Friday for rate hikes indicated that traders felt they would be pushed back.
In addition to equity markets on Monday, I'll also be watching the price of oil. Oil plunged more than 5% on Friday on anticipation of travel restrictions and lower demand. But with the current OPEC+ / strategic petroleum reserve clusterfuck, who even knows where oil ends up weeks from now. I'm expecting a rally heading into Monday's session.
Also of interest will be the reaction of gold, which rallied on Friday as traders de-risked and accounted for more inflation as a result of stimulus that would no doubt be on its way if we locked back down again.
Heading into the new week, I want to ask my readers:
What do you think the market will do on Monday? (My guess is a strong rally).
More importantly, will the Fed be able to use Omicron as an excuse to push back the taper/delay rate hikes?
Additionally, do you think the government will use Omicron as a reason to restart more mandates and lockdowns, or does it feel like the country has simply had enough? To me, it is starting to feel like it is palpable how the country is pushing back against more government mandates - no matter what explanation we are given.
I usually don't blog on Sundays but thought this could be an interesting topic of discussion before futures open at 6PM EST on the East Coast.
Please leave your thoughts, comments and questions below - and have a great Sunday:
1. Market will probably take back about half of it's Friday loss;
2. Fed won't use Omicron as an excuse but it will be something else, like the RATE of price inflation decreasing ("disinflation");
3. The Gov won't use Omicron as an excuse for more lockdowns and mandates, in part because they don't want more resistance and scrutiny. I think getting people vaccinated and now a booster is the priority because that is permanent (damage.)
The dollar index was jetisson some currencies in logaritmic strengthening and the euro following Erdogan's lira mildly. Logic and unlogic, if I follow the Dutch King Willem who fired and signed off unlogic thinkers with his entourage of face masked shoppers standing behind me in the que in front of a teller, then the Central Banks cannot afford debt and energy with a strong dollar.
Yes, I think it will rally. The fed would like to use it as an excuse to delay the taper, but it probably can't do that if they do rally to all time highs. They will be content to taper slowly with double digit+ inflation. The countries that want to lockdown will continue to do so without Omicron, those areas that are against the mandates won't change their mind.
I was buyer of all kinds of energy on Friday, and I hope for one more weak day to make a few more additions....Sunday afternoon premarket is mildly green, but that doesn’t mean much imho. Technically oil got pretty wrecked, so some chop is probably a given. I think the broader indexes will make new highs again soon, and that we have a ways to go before we hit a blow-off top. I do think the taper dot plots (what a lot of bs anyway) might get adjusted. There’s always a good reason not to raise rates. Pick your crisis de jour.
2 & 3: Government won't let a crisis go to waste. Yes they'll use Omnicron to push back the taper as Schiff outlined in his latest pod. They were already on thin ice pre Omnicron. Also, we've seen how quickly flight restrictions got put on. In Ontario some cities were already locking down. Look at Guadeloupe, Austria, etc...
The issue ain’t the virus itself. Novel corona wasn’t very deadly and this should be more infectious and less deadly (assuming normal virus evolution).
The issue is the govt reaction. The central banks will pump money. They were going to do that if the wind blew the wrong way.
What will Biden do? Are we in for big lockdowns? His approval is suffering and Dems still believe this Covid nonsense. (If they managed this correctly from the start there would’ve been no “pandemic”)
COVID playbook is beyond me. I know enough about virology to know that this mutation cannot be any more deadly than the original strain. As many have said, a virus will virus, and what we are seeing is another, perhaps more contagious version, but not deadlier. Machines sold off on Friday as year end performance for asset managers is important. Bottom line: we see a rally.
They named this one. Omicron. Like a transformer. Do you know how many focus groups it took to find something scary sounding that wouldn't offend the CCP/WHO? Even our local news channels (organically and authentically) have created new splash screens and mood music for stories related to OMICRON. You don't just flush an effort like that down the toilet just because it's garbage.
Instead you've got to let out the line a bit in order to set the hook. ANTI-VAXXERs and those who don't worship at the church of Real Science (TM)* will run with the easy truths about body counts versus test counts. This weekend they'll pat each other on the back discussing how obvious it is that this isn't a thing. The market will tease a rebound in pre-trading hours tomorrow. And then the TODAY Show will casually drop the Omicron story that 100% of healthy 22 year olds named Suzanne in Belgium have died from (with) Omicron despite only having one single comorbidity (stage 4 cancer.)
Within 15 minutes every 'news' station world-wide will break into their 'regular programming', possibly even interrupting Pfizer commercials, to report that young women are dropping like flies. It is also important to point out that our poor, poor Suzanne was unvaccinated due to the fact that she was medically unable to get a fourth booster. And thus we begin our second wave of toilet paper shortages.
“When there’s blood on the streets buy…oil(?)”. Took the hysteria opportunity to move half my gold mining stocks which were flat/slightly up on the day, into the oil stocks which were down as much as 12% (USL, DBO, etc). I think Monday market definitely bounces. Question is how much, I don’t see face-ripping like some predict. Not with the boys who cried Delta trying to stay relevant with doom and gloom peddling, muddying the outlook. I think decent bounce Monday, then some sideways while we get more clarity. Once we realize more spreadable=less deadly (again), it moves higher. Oil at $100 quicker then we think. Will begin moving gold mining minus profit back once I get that 12% ish. When the hysteria fades the energy problems will still be here. I give it a week or two before news high for market, maybe slightly longer for oil.
Great article Chris. On Friday, all I could think about was how much of an overeaction this was. I placed some options bets that markets will recover pretty sharply Monday. Feeling pretty good about it...and glad you agree.
Possible Omnicron can be used to push back and delay taper.
I think we might see a gap down in futures with a snapback rally starting Monday’s open. Stuff like energy and airlines actually finished well off their lows on Friday. Friday’s wash reset some of the overbought indicators out there as well. In regards to the Covid strain, I do think more data will need to come out to determine if any harsher government actions will be needed; but a Temporary Travel ban seem the most likely scenario. Tough to see anything worse than that, the country would go into hysteria (I believe) if we had curfews and lockdowns again. I also hope the government doesn't take this new strain as an excuse to further mandate vaccines, because I can see this administration really hammering that with new fear mongering.
I agree. Markets should rally tomorrow. Government will try and use this new variant for further restrictions. But too many people are more aware of the plandemic and thus government efforts will be ignored to a large extent. Citizens need to push back with greater intensity and determination. We need to fight to preserve our natural right to life, liberty (with responsibility), and the pursuit of happiness. Masks, mandates, and lockdowns are antithetical to freedom. Let doctors unencumbered by government bureaucrats work through virus protocols with their patients that do no harm. Too many adverse events with vaccine and deaths but go unreported for obvious reasons. Wake up 🇺🇸 we can overcome these tyrannical dirtbags!
Despite the market reaction on Friday, I think we’re likely weeks away from seeing any true direction (especially down) as a result of the new variant.
I think most people are keen to avoid a replay of the 2020 lockdowns and economic cratering that lead to extreme fiscal and monetary stimulus. So what I see happening is more of a “wait and see” approach where we assess how contagious the new variant is and how it affects hospitalizations. Only then, would more strict measures be taken that would negatively impact the economy.
1. 1% net rise across the board, with a jump of as much as 2% during the day and a giveback during the 3:00 power hour.
2. Fed probably can't use Omicron as an excuse, as this may be their last chance to seize the reins.
3. Too early for the Covidian elites to strike. Expect mandates, lockdowns, and general mischief as 2022 election season progresses.
1. Market will probably take back about half of it's Friday loss;
2. Fed won't use Omicron as an excuse but it will be something else, like the RATE of price inflation decreasing ("disinflation");
3. The Gov won't use Omicron as an excuse for more lockdowns and mandates, in part because they don't want more resistance and scrutiny. I think getting people vaccinated and now a booster is the priority because that is permanent (damage.)
The dollar index was jetisson some currencies in logaritmic strengthening and the euro following Erdogan's lira mildly. Logic and unlogic, if I follow the Dutch King Willem who fired and signed off unlogic thinkers with his entourage of face masked shoppers standing behind me in the que in front of a teller, then the Central Banks cannot afford debt and energy with a strong dollar.
@QTR - #1 ... who cares? Me...I am buying more gold. #2 & #3 Rahm’s Rule: ‘Never Let a Serious Crisis Go to Waste’.
As always, I enjoy reading your Substack...thank you!
Yes, I think it will rally. The fed would like to use it as an excuse to delay the taper, but it probably can't do that if they do rally to all time highs. They will be content to taper slowly with double digit+ inflation. The countries that want to lockdown will continue to do so without Omicron, those areas that are against the mandates won't change their mind.
I was buyer of all kinds of energy on Friday, and I hope for one more weak day to make a few more additions....Sunday afternoon premarket is mildly green, but that doesn’t mean much imho. Technically oil got pretty wrecked, so some chop is probably a given. I think the broader indexes will make new highs again soon, and that we have a ways to go before we hit a blow-off top. I do think the taper dot plots (what a lot of bs anyway) might get adjusted. There’s always a good reason not to raise rates. Pick your crisis de jour.
Responding with a common cliché:
2 & 3: Government won't let a crisis go to waste. Yes they'll use Omnicron to push back the taper as Schiff outlined in his latest pod. They were already on thin ice pre Omnicron. Also, we've seen how quickly flight restrictions got put on. In Ontario some cities were already locking down. Look at Guadeloupe, Austria, etc...
The issue ain’t the virus itself. Novel corona wasn’t very deadly and this should be more infectious and less deadly (assuming normal virus evolution).
The issue is the govt reaction. The central banks will pump money. They were going to do that if the wind blew the wrong way.
What will Biden do? Are we in for big lockdowns? His approval is suffering and Dems still believe this Covid nonsense. (If they managed this correctly from the start there would’ve been no “pandemic”)
How anyone can contemplate the 2020
COVID playbook is beyond me. I know enough about virology to know that this mutation cannot be any more deadly than the original strain. As many have said, a virus will virus, and what we are seeing is another, perhaps more contagious version, but not deadlier. Machines sold off on Friday as year end performance for asset managers is important. Bottom line: we see a rally.
They named this one. Omicron. Like a transformer. Do you know how many focus groups it took to find something scary sounding that wouldn't offend the CCP/WHO? Even our local news channels (organically and authentically) have created new splash screens and mood music for stories related to OMICRON. You don't just flush an effort like that down the toilet just because it's garbage.
Instead you've got to let out the line a bit in order to set the hook. ANTI-VAXXERs and those who don't worship at the church of Real Science (TM)* will run with the easy truths about body counts versus test counts. This weekend they'll pat each other on the back discussing how obvious it is that this isn't a thing. The market will tease a rebound in pre-trading hours tomorrow. And then the TODAY Show will casually drop the Omicron story that 100% of healthy 22 year olds named Suzanne in Belgium have died from (with) Omicron despite only having one single comorbidity (stage 4 cancer.)
Within 15 minutes every 'news' station world-wide will break into their 'regular programming', possibly even interrupting Pfizer commercials, to report that young women are dropping like flies. It is also important to point out that our poor, poor Suzanne was unvaccinated due to the fact that she was medically unable to get a fourth booster. And thus we begin our second wave of toilet paper shortages.
I'm all in on Charmin. And bidets.
* - May not contain actual science.
“When there’s blood on the streets buy…oil(?)”. Took the hysteria opportunity to move half my gold mining stocks which were flat/slightly up on the day, into the oil stocks which were down as much as 12% (USL, DBO, etc). I think Monday market definitely bounces. Question is how much, I don’t see face-ripping like some predict. Not with the boys who cried Delta trying to stay relevant with doom and gloom peddling, muddying the outlook. I think decent bounce Monday, then some sideways while we get more clarity. Once we realize more spreadable=less deadly (again), it moves higher. Oil at $100 quicker then we think. Will begin moving gold mining minus profit back once I get that 12% ish. When the hysteria fades the energy problems will still be here. I give it a week or two before news high for market, maybe slightly longer for oil.
Great article Chris. On Friday, all I could think about was how much of an overeaction this was. I placed some options bets that markets will recover pretty sharply Monday. Feeling pretty good about it...and glad you agree.
Possible Omnicron can be used to push back and delay taper.
Look forward to the next post and/or podcast!
I think we might see a gap down in futures with a snapback rally starting Monday’s open. Stuff like energy and airlines actually finished well off their lows on Friday. Friday’s wash reset some of the overbought indicators out there as well. In regards to the Covid strain, I do think more data will need to come out to determine if any harsher government actions will be needed; but a Temporary Travel ban seem the most likely scenario. Tough to see anything worse than that, the country would go into hysteria (I believe) if we had curfews and lockdowns again. I also hope the government doesn't take this new strain as an excuse to further mandate vaccines, because I can see this administration really hammering that with new fear mongering.
I agree. Markets should rally tomorrow. Government will try and use this new variant for further restrictions. But too many people are more aware of the plandemic and thus government efforts will be ignored to a large extent. Citizens need to push back with greater intensity and determination. We need to fight to preserve our natural right to life, liberty (with responsibility), and the pursuit of happiness. Masks, mandates, and lockdowns are antithetical to freedom. Let doctors unencumbered by government bureaucrats work through virus protocols with their patients that do no harm. Too many adverse events with vaccine and deaths but go unreported for obvious reasons. Wake up 🇺🇸 we can overcome these tyrannical dirtbags!
Despite the market reaction on Friday, I think we’re likely weeks away from seeing any true direction (especially down) as a result of the new variant.
I think most people are keen to avoid a replay of the 2020 lockdowns and economic cratering that lead to extreme fiscal and monetary stimulus. So what I see happening is more of a “wait and see” approach where we assess how contagious the new variant is and how it affects hospitalizations. Only then, would more strict measures be taken that would negatively impact the economy.