Covid variant will cause markets to wobble in the short term
Financial markets will temporarily wobble on news of the new Covid variant, but concerns will be quickly shrugged off. The new strain of coronavirus was detected earlier this week in southern Africa, weighing on global markets on Thursday.
Travel stocks, hospitality companies and bank stocks bore the brunt of the announcement. The World Health Organization is meeting to determine whether the so-called B.1.1.529 strain should be designated a variant of “interest” or of “concern.” The variant reportedly carries an “extremely high number” of mutations.
As I was quoted by the Daily Telegraph amongst other media, not surprisingly the new Covid strain has caused jitters in the financial markets, with the news leading to a knee-jerk reaction. Moreover, Wall Street was closed on Thursday due to Thanksgiving, so a large number of global trades were missing, thereby accentuating other moves.
However, Friday’s wobble will likely only be short-lived, with markets remaining bullish for now. Global markets have risen 16% in 2021, with investor focus on the post-pandemic rebound. Looking back, they largely dismissed the Delta variant that caused a mini-wave of market panic over summer. As such, I think we’ll see the same with this latest variant. The main reason for this is because virus mutations are now expected, and we have a better understanding of how to cope with them.
In contrast, global financial markets will be concentrating their attention on other issues such as high inflation stemming from supply-side problems, and the probability of a faster pullback from ultra-loose monetary policy.
Therefore, I believe we’ll see a temporary wobble within the markets due to the uncertainty of this latest variant of coronavirus, but in the main, they will stay bullish and focused on other concerns. Click here for my YouTube, LinkedIn profile and Twitter accounts.