Don’t panic. Among the big US business houses, the unexpected arrival of the Omicron variant and the decidedly nervous reaction of the markets in the last week must not lead to a flight from risk. Indeed, it can be transformed into a delicious opportunity. For example, the analysts of JP Morgan look at this development of the pandemic with optimism. The Omicron variant is arguably more infectious, but early released studies suggest it may also be less deadly, which would fit the historically observed pattern of virus evolution, as noted by researchers. strategists of JP Morgan Marko Kolanovic and Bram Kaplan. All of this could be good for the markets because it could signal that the end of the pandemic is not that far off.
Omicron: what analysts think
The emergence of the new strain of the virus has rocked markets in recent days, with countries around the world hitting travel restrictions. While some health officials said it could take weeks to reach a verdict, Australian chief physician Paul Kelly pointed out that there are no indications that it is more deadly than other strains.
JP Morgan’s Kolanovic earlier this year supported the reopening of trading and defended value stocks as the pandemic evolved. He also argued that markets have overreacted to the threat of delta variant. The Omicron variant would be in line with historical models of a less severe, more transmissible virus to quickly crowd the more severe variants, which could turn omicron into a catalyst for turning a deadly pandemic into something more like seasonal flu. as JP Morgan strategists pointed out in a note. “If this scenario were to happen, instead of skipping two letters and calling it omicron, WHO may have jumped all the way to omega,” the last letter of the Greek alphabet, strategists said.
On the same wavelength BlackRock. “We see the Fed starting to gradually raise rates in 2022 when the economy no longer needs stimulus, assuming the strain of the virus doesn’t derail the economic recovery. This would push yields higher across the spectrum, keeping the challenging outlook for nominal bonds, ”BlackRock remarks in a statement released in recent days. “We believe equities offer higher risk-adjusted returns and a potential buffer against inflation risks, especially as we see rates rise less than in previous bullish cycles and less than markets are expecting,” the experts add.
“We remain invested for now, we still prefer stocks, ”BlackRock said shortly. “Omicron could trigger growth downgrades, worsen risk appetite and hit the service sectors, especially in the short term. It may even question restarting if vaccines or treatments prove ineffective. If they are effective, the new strain only delays the restart, and we don’t see it changing the otherwise solid picture for equities: a strong restart and the prospect of still low real rates. Consequently, for now we rely on the declines in shares linked to COVID ”.