Wall Street rebounds after Friday’s omicron panic

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Markets held steady on Monday as investors took stock of the news surrounding the new Omicron version of Covid-19, which sent shock waves through public health organizations and governments last week.

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Wall Street regained some of its lost ground on Friday, when all three major indices fell more than 2 percent. The Dow Jones Industrial Average had its worst day of the year, falling 905 points, or 2.5 percent. The broad-based S&P 500 fell 2.3 percent and the tech-dominated Nasdaq fell 2.2 percent.

“Friday confirmed to us that COVID is still investor fiction,” said Greg Basuk, CEO of AXS Investments. “Up until the last month or two, we were seeing a lot of strength in the market,” he said, with strong corporate earnings and predictions of a strong holiday spending season.

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The S&P rose as much as 1.5 percent on Monday, with investors reassured by remarks from President Joe Biden, who continued to stress the importance of vaccinations and boosters. “The variant is a cause for concern, not a cause for panic,” he said, adding that he did not expect the lockdown to be reinstated in response to the emergence of the Omicron variant.

Investors were happy with Biden’s remarks that O’Micron is “a cause for concern, not a cause for panic.”

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Market observers said most of Friday’s fall was driven by sentiments rather than on data. “It was more an emotional day than anything else,” said Michelle Goldberg, president of ClientFirst Strategy. “There are too many short-term craters in the market that have emerged since the pandemic … investors are hyper-sensitive to every news that comes out.”

Some noted that, as stocks become more expensive, valuation ratios have risen, and concerns about asset bubbles suggested a correction was waiting in the wings. Jeff Carbone, managing partner at Cornerstone Wealth, said, “Growth drivers in particular could be less with what is happening.

“It is looking for a catalyst,” said Darren Shuringa, CEO of ASYMmetric ETFs.

As has been the case for quite some time since March 2020, the virus remains the major factor determining the course of economic recovery,” said Shuringa. “Friday, the catalyst was again Covid… the new version was a reason for investors to pull out.”

Keith Buchanan, portfolio manager at Global Investments, said Friday’s decline was exacerbated by technical factors. The combination of a shorter trading day coupled with post-holiday volume amplified the impact of a sharp selloff. “It’s traditionally a low volume day, so it was a crazy dash to have a short exit,” he said. With news of Omicron coming so fast over a weekend ago, Buchanan said investors were facing the prospect of being susceptible to any impending bad news.

“The news flow on the virus doesn’t stop over the weekend, so if you have a short trading day and probably have more exposure than you can comfortably hold, I think that contributed as well,” he said.

Since the start of the pandemic, there have been times when the economic recovery was gaining momentum, only to stop with the emergence of a new mutation. Buchanan said it was not surprising that investors were initially most afraid. “The last type of concern was the delta, and there was clearly a tremendous human toll in the delta,” he said. “Psychologically, the worst case scenario is that we go back in time and people disconnect from the economy.”

In the coming weeks, experts predicted that the market is likely to exhibit more volatility, adding that investors should focus on their long-term goals.

For retail investors and retirement savers, pros say the message is two-fold: Don’t panic, but consider this a good opportunity to evaluate your investment allocation and see if it aligns with your risk tolerance and wealth-building timeline. Yes or No.

“Retail investors take on more risk in their search for income,” Shuringa said. “I think the takeaway for average savers is that they have to ask themselves, How do I risk risking my portfolio?”

“Most of the time, investors are best off just staying the course. I think some fear factors still remain,” Goldberg cautioned, adding that timing the market or trading according to day-to-day news cycles could result in major losses. “We’re living on a minute-by-minute basis. It really is the worst way to make decisions.”

In the coming weeks, experts predicted that the market is likely to exhibit more volatility, adding that investors should focus on their long-term goals.

“As we move into 2022, we are very excited about reopening financially … but in the immediate term, we anticipate a period of volatility until there is more certainty regarding the version,” Basuk said. “We’re seeing that investors are looking for that market compass to land in a really clear direction. There’s still a lot of uncertainty, and it’s driven by more questions than answers.”

Credit: www.nbcnews.com /

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