Covid Shows It Can Still Rock Markets. What Has Changed for Investors.

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It took only a few hours for the mood of the market to shift from full Thanksgiving table joy to the panic of a new COVID-19 version.

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A new version of the virus is spreading, causing the Dow Jones Industrial Average to drop 900 points on Friday, its worst performance in more than a year. US crude fell 13%, and the 10-year Treasury yield declined as investors flocked to the haven. The Stockoff Europe 600 Index fell 3.7% and the iShares MSCI World Exchange-Traded Fund (ticker: URTH) fell 2.2%.

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“Sell first and ask questions later,” wrote Ryan Detrick, chief market strategist at LPL Financial.

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Markets closed at 1 pm due to US holiday hours, and volume was low, which could lead to increased volatility.

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Sales follow a familiar COVID-era pattern. Shares of companies that cater to stuck-up consumers such as Zoom Video Communications (ZM), and vaccine-makers Moderna (MRNA) and Pfizer (PFE) fell, while stocks such as Delta Air Lines (DAL) had to reopen.

The fall was a reminder that Covid is still the most powerful force in the markets, and is likely to drive more market action than inflation in the short term. Still, it may be too early to consider Friday’s slide a true turnaround in trends. The new version is related, but it will force a financial calculation only if it is proven to avoid vaccines’ protection. The sell-off, driven by the news of the former variants, has been short-lived.

“We’ve seen other variants that are more fleeting,” says Keith Lerner, co-chief investment officer at Truist Advisory Services. “It complicates things, but I also think you should have some optimism that we’ve been living with it for almost two years and companies have adapted. I think whatever comes out of it, our The pass is somewhat of a playbook on how to deal with it, unlike the first time around.”

Investors are counting on the Federal Reserve to step in if needed, betting it will delay interest rate hikes until next September.

The new COVID variant, which the World Health Organization has given the Greek letter omicron, was first identified in South Africa. As of Friday only a few dozen cases had been diagnosed, but some have already been detected in Hong Kong, Belgium and Israel. The variant is worrying because it contains more mutations than prior strains, which could make it more transmissible or affect how well the immune system copes.

The WHO said after Friday’s meeting that the variant was “a matter of concern” and that early evidence suggests it poses a high risk of re-infection. It may take weeks to determine whether it can evade human immune responses, including protection against serious consequences.

However, the governments wasted no time in restricting travel. The US, the United Kingdom, Germany, Italy and Singapore halted flights to and from South Africa and surrounding countries. Officials in other countries are considering similar restrictions, with the European Commission advising that countries block entry of travelers from countries where the variant has been identified.

The sudden restrictions hit the travel industry, which collectively sold out. Cruise lines were the worst hit, with Royal Caribbean (RCL) down 13%. The US Global Jets ETF (JETS) fell 7.2%, with shares of airlines focused on international travel such as United Airlines (UAL) down 9.6%, which was 4.3% lower than domestic-focused companies such as Southwest Airlines (LUV). Was. Hotel chains also fell, with both Hilton (HLT) and Marriott International (MAR) falling more than 6%.

Advisors were in no rush to recommend travel stocks, but some said the sell-off presented a buying opportunity in other sectors. The Wells Fargo Investment Institute told clients that cyclical stocks such as financials and industrials, for example, were worth buying at current levels.

However, finding a quiet place to wait out the uncertainty is not that easy. Despite inflationary fears, bonds and treasuries offer remarkably low returns. The 10-year note yields 1.48%, which is less than half of the rate given three years ago.

But the value of holding some penny in fixed-income products and even gold was clear on Friday. Gold prices were flat during the day – a break from the cold, but some comfort nonetheless. Bitcoin, sometimes referred to as digital gold, fell 8% along with other riskier assets. Investment-grade corporate bonds also outperformed, with the iShares iBoxx $ Investment Grade Corporate Bond ETF (LQD) up 0.8%.

The Learner of Truist notes that the bank recommends being underweight in fixed income. But, he adds, “we have continued to remind our investors that even though we are underweight, it does not mean that we are pulling out those investments. As of today, the main outperforming ones are: One of the asset classes is still high quality fixed income.”

write to Avi Salzman [email protected] Feather

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