Last Friday, the key US stock indices declined significantly. However, as the next trading day (Monday) showed, there will be no panic on the stock market today. The new strain of omicron on Friday unsettled the market, which had just celebrated Thanksgiving, but at the same time, the fall in stock indices clearly cannot be called a "collapse". And on Monday, all three indices – the Dow Jones, NASDAQ, and S&P500 - began to recover and are still very close to their absolute highs. Thus, the first conclusion to be drawn is that at this time the omicron strain is not too dangerous for the markets. In our other articles, we said that the foreign exchange market paid almost no attention to the news related to the new strain.
Further, the monetary policy of the Fed, as well as the QE program, is still more important for the US stock market. Already in December, the Fed can make it clear to the markets when to expect a rate hike, as well as answer the question of whether the stimulus program will be curtailed at a faster pace? And from our point of view, the answers to these questions will be much more important than another "more dangerous and more contagious" strain. It is still very early to conclude the strain since a very small number of people have officially become ill with it. Yes, once a small number of people were infected with the delta strain, and now most of the world is sick with it. But in this case, it does not matter at all which new strain appears. As doctors assured, omicron does not cause serious complications in most cases and does not lead to death (also in most cases). Its only feature is that for some reason young people are infected with it to a greater extent. However, it is young people who usually have very good immunity, so they can tolerate it like a common cold or flu. Of course, if you think on the scale of the entire economy of any country or the whole world, then the omicron strain can cause a lot of problems. Now we see that European countries are closing for a new "quarantine". However, Omicron has nothing to do with this quarantine. Thus, again, quarantine or "lockdown" can cause not only a new strain but also almost any strain of "coronavirus". When delta first appeared, many doctors said that vaccines work worse against it than against other strains. Now we hear the same thing about Omicron. Based on all of the above, we believe that the US stock indices may recover completely in the near future and then they will wait for the Fed meeting. Or at least Friday Nonfarm Payrolls.
