If uncertainty is the worst counselor for markets, investors must be preparing for a good dose in the coming weeks because everything surrounding omicron is, above all, volatile and diffuse.
After the strong drops of the bags on Friday and the recovery of yesterday Monday, among the experts extends the idea of an “overreaction” by investors, although caution is imposed while waiting to determine the possible economic scope of omicron
.
“A violent correction has to do with the profit accumulated in the year and with the market date. A reaction would not have occurred if the markets were not so high and we did not meet the DECEMBER doors,” explains Ignacio Cantos
, Director of Investment of ATL Capital, in reference to the traditional end rally of the year.
In his opinion, what is known so far from omicron is “very preliminary” to get out that massively of the positions, that’s why he believes that investors “sought more an excuse to sell than a reason supported by the facts”
And that’s why it also predicts that, “if there is no very alarming news these days, in two weeks it will end up recovering the lost.”
One of the key issues these days will be to calibrate the economic impact of omicron and that has to do with defining its capacity of contagion and with its resistance to current vaccines.
Analysts believe that answers to these questions will still take several weeks to get to know each other and meanwhile, they advise not to rush when it comes to undoing positions.
In this line, Bankinter’s analysts are located, who estimate that the final balance of this stock market episode “will be less bad than on Friday the European bags discounted and that the rebound will not take long to arrive and will favor the technological, once again
“.
At the macroeconomic level, the greatest fear has to do with the new measures and restrictions that different governments could start up to try to contain the expansion of the virus.
Without going any further, the European Union decided on Friday to prohibit the arrivals of flights from southern Africa and Japan has also closed its borders abroad.
Analysts are questioned to what extent these measures can stop the economic recovery underway after the pandemic and erase a good part of the benefits achieved in the markets in recent months.
“The appearance of omicron has the potential to change the macroeconomic and short-term market perspectives. The risks for global growth have already been lowered to the deceleration of China and the energy crisis as main winds against, but now
The new variant of the virus adds more uncertainty to those macro prospects and policies of the coming months, “says Anna Stupnytska, a global economist at Fidelity Inteminist.
The other macroeconomic background question is how the central banks will react to this new situation now that several of them arise begin to withdraw part of the huge number of stimuli they introduced to deal with the crisis.
“With the probability that inflation is maintained at elevated levels and that new interruptions in the supply chain make it rise even more, central banks face an increasingly difficult political dilemma. In order to protect growth and the
Labor markets, it may be necessary to reduce the aggressive rhetoric of institutions such as the Federal Reserve and the Bank of England, at least until the new variant reveals its letters, “says Anna Stupnytska, Fidelity International.
Ignacio Cantos, for its part, considers that this episode could make some central banks rethink their plan of monetary policy adjustments, especially in the United States, where the Fed already contemplated accelerating tapering in December.
“In Europe, of course, it would be totally discarded a rise in rates in 2022”.
Without putting aside caution, volatility and uncertainty these days, there are many firms that move away from panic to enter the search for opportunities.
And in this context, the technologics become the objective of many of the looks.
The great firms of the sector were already the great winners of the coronavirus year and the fear of new replicins returns to place them among the favorite options for the end of the year.
“This could be a good time to increase exposure to quality companies, particularly within the information and health technology sectors, together with the financial sector,” says Mathieu Racheter, Julius Baer’s equity strategy director.
Ben Laidler, global market strategist of the investment platform in Etroo multi-hackers, believes that large technology companies are “new defenses, with strong growth at all times and solid balances, so their assessments are poorly demanding”
.
He also says that they are “fundamental for portfolios” values and that “the increase in uncertainty and the decline in the yields of the bond will benefit them.”
