Welcome to the weekly market update from Signature Wealth Management. I’m Brian Ransom, Research Director from Signature Wealth and here’s what happened in the market this week.
The market has been volatile in the two weeks since the last update. Following a strong rally in October and November, the market was surprised the day after Thanksgiving with negative news on the COVID front that sparked a 4% sell off.
The news that caused the selloff was the discovery of a new, alarming variant of the COVID-19 virus in South Africa. Omicron, first identified in the region surrounding Johannesburg exhibits several alarming properties that have disturbed scientists and lawmakers around the world.
The primary reason for concern is the number of mutations in the spike protein. Previous variants show a limited number of mutations but Omicron shows over 50. Because there are so many mutations, there are concerns that the virus could now see increased transmissibility, cause more severe disease, or most importantly, evade the immune system.
These three primary questions revolving around the new variant are difficult to answer this early on in the wave. But there is some anecdotal evidence coming from the doctors and epidemiologists in South Africa. Fair warning, what we know so far is only anecdotal and it is not based on statistically significant, peer reviewed data as of this point. But regarding increasing risk of transmissibility, there is pretty significant evidence that Omicron is more transmissible than Delta stemming from the fact that in just a few months, Omicron is now the dominant strain in the regions it was first detected. Simultaneously, it appears so far that sickness stemming from Omicron is not that alarming, specifically for vaccinated individuals. There is some preliminary data in South Africa that shows increasing hospitalizations for unvaccinated individuals, but that data has not been fact checked. Regarding the vaccination viability, there is some evidence of increasing breakthrough infections with mild symptoms. More alarmingly, there is also significant evidence that reinfection does occur for individuals who previously had the virus. At this time, this is the first evidence of a variant that causes reinfection for naturally immune individuals.
Initially, the news of the new variant spooked the market on November 26th causing a 2.5% selloff. Clearly, the market is still digesting the unknowns surrounding the variant and the subsequent reaction from individuals and governments. For the short term, it appears news on the Omicron variant is going to be the primary driver of market returns.
For more information on this topic or a variety of other topics including market updates, financial planning, and wealth management please like, subscribe, and follow. And I’ll see you next week.
1.FactSet Research Systems. (n.d.). S&P 500 (Interactive Charts). Retrieved Decemer 3, 2021, from FactSet Database.
2.Juliet R.C. Pulliam, Cari van Schalkwyk, Nevashan Govender, Anne von Gottberg, Cheryl Cohen, Michelle J. Groome, Jonathan Dushoff, Koleka Mlisana, Harry Moultrie medRxiv 2021.11.11.21266068; doi: https://doi.org/10.1101/2021.11.11.21266068
3.Toby Sterling. Reuters. “Dutch say 14 air passengers from S. Africa with Omicron were vaccinated.” December 2, 2021. Retrieved from https://www.reuters.com/world/europe/dutch-covid-19-quarantine-ends-most-safrica-passengers-authorities-2021-12-02/
4.Network for Genomic Surveillance in South Africa (NGS-SA). “SARS-CoV-2 Sequencing Update” November 26, 2021. Retrieved from https://www.nicd.ac.za/wp-content/uploads/2021/11/Update-of-SA-sequencing-data-from-GISAID-26-Nov_Final.pdf#page=8
5.Kai Kupferschmidt. Science Magazine. “Where did ‘weird Omicron come from?” December 1, 2021. Retrieved from https://www.science.org/content/article/where-did-weird-omicron-come
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