‘Trapped’ investors, here’s your chance to escape one overplayed group of stocks, says strategist

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Investors are reconsidering at least part of Friday’s brutal Omicon-variant-induced selloff, with stocks and other assets rebounding through the end of the week.

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We can have the word “light” to thank for that.

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circling over the weekend was a comment a south african doctor who previously raised the alarm over the new coronavirus variant in patients but reported “extremely mild” symptoms. While we are in early days with this new version, it will be positive for the stock if it is true, tweeted Billionaire Pershing Square hedge-fund manager Bill Ackman.

But the same doctor also highlighted potential risks For older, uninfected patients. The bottom line is we don’t know a ton more than Friday and it will take some time to figure out this next stage, although at least some of the aftershocks will have gotten worse.

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The JPMorgan team, led by Mixo Das, said, “Unless the two big questions are answered,” the reopening, value (especially versus quality), and riskier assets in general, face this new overhang. They are: what are the chances of serious consequences – hospitalization and death – and how will the new version respond to existing vaccines and treatments?

Our call of the day That’s from Michael O’Rourke, chief equity strategist at JonesTrading, who sees a silver lining from Friday’s sale. “The big rally in pandemic plays provides an exit opportunity for trapped investors,” he told clients in a note on Sunday.

For example, Zoom Video ZM,
+5.72%
and Peloton Pton,
+5.67%
Each rose about 5% on Friday, and is slipping into some premarket action. After huge gains in 2020, those stocks are down 55% and 35%, respectively.

“Countless times throughout 2020 we warned against extrapolating an unusual year into the future indefinitely, yet the market did it anyway. Collectively, the group was awarded multiples, which took years to develop. It will take and, in some cases, decades. This should prove to be the boom investors have been waiting for,” O’Rourke said.

The strategist reminds us that “the bull tape doesn’t stay down long enough to cover someone’s shorts and the bears don’t stay long enough to sell,” he said.

“The policy normalization process will continue as inflation is real and is not expected to subside if the Fed does not continue with the normalization process. Over the past 13 years, the FOMC has had the luxury of a benign inflationary environment so that it can control equity markets. And now that luxury is gone. As such, it is very attractive relative to price hikes,” he said.

Oil stocks are among the price plays it sees to remain in demand.

Echoing some of these views, Mark Heifel, chief investment officer for global wealth management at UBS, urged investors not to act hasty, as he said the sell-off was a lesson in staying diversified across markets and sectors.

“We maintain our positive outlook on energy and financials despite this latest volatility. We think the energy sector will be supported by oil prices which are likely to remain high this year and next year,” he said.

Market

stock futures ES00,
+0.69%

YM00,
+0.49%

NQ 00,
+0.83%
After the worst Black Friday session in more than 50 years, Dow futures are seeing a nice bump with 200 points up. Asian markets were less bullish, with the Nikkei NIK down 1.6%.
-1.63%,
While the European stock SXXP,
+0.90%
Performing slightly better. oil prices CL00,
+4.86%

BRNF22,
+4.35%
After a 13% drop on Friday, nearly 5% are up. The bond yields TMUBMUSD10Y,
1.554%
are up and gold GC00,
+0.33%
higher than

buzz

The Omicron variant has now been found in more countries, notably in Europe, as the World Health Organization urged widespread testing and warned of potential “serious consequences” if new types of fuel are growing. Japan joined Israel in banning all foreign tourists.

US officials such as Dr. Anthony Fauci, director of the National Institute of Allergy and Infectious Diseases and chief medical adviser to the White House, have urged people not to panic.

Black Friday online shopping reportedly Came in at $8.9 billion, the low end of expectations from industry watcher Adobe, and first-time spend that didn’t top the previous year. Some early discounts may be to blame. In any case, look at retailers like Amazon AMZN,
-2.12%,
walmart wmt,
-1.12%
and target tgt,
-0.88%,

The data could prove to be a distraction for investors this week, with November jobs data coming out on Friday. Home sales pending for October are ahead.

Chart

Goldman Sachs has set out four global growth scenarios that could play out due to the Omicron variant. They include some negative scenarios, one worse than the other, one where the version becomes a “false alarm” and an upside down scenario. Until the situation becomes clear, chief economist Jan Hetzius says the investment bank is not making any forecast changes.

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Merriam-Webster’s if not surprising word of 2021: the vaccine.

It sucks to be 60, but it’s better than being dead, Actor George Clooney says,

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