Breaking News
Get Actionable Insights with InvestingPro+: Start 7 Day FREE Trial Register here
Investing Pro 0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

Analysis-Ready to pounce: Investors prepare for swings, opportunities as Omicron variant spreads

Stock MarketsNov 30, 2021 01:55AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
© Reuters. FILE PHOTO: A man wearing a protective face mask walks by 14 Wall Street in the financial district of New York, U.S., November 19, 2020. REUTERS/Shannon Stapleton/File Photo

By Maiya Keidan

(Reuters) - The latest COVID-19 virus variant has sparked a wild ride in markets.

Investors say the volatility probably isn't over yet, as they look for selective opportunities to pounce on while protecting their portfolios as the year-end nears.

The emergence of the Omicron variant saw the S&P 500 notch its worst one-day percentage loss in nine months on Friday - only to rebound on Monday as hopes grew that the variant might be milder than first feared. While the World Health Organization (WHO) cautioned of a very high risk of infection surges, U.S. President Joe Biden said America would not go back to lockdowns.

Some investors saw opportunity in those swings.

"We have been endeavoring to take advantage of sharp sudden concerns (such as Omicron) to add to positions where we believe the value more than outweighs any new/incremental risk," Shawn Kravetz, founder of Esplanade Capital, told Reuters by email. He is looking to swoop in if markets take another dive.

London-based hedge fund Westbeck Capital Management took advantage of Friday’s sharp drop in oil to take a position in Brent crude. The fund is waiting for more details on the Omicron variant to become clear before making a bigger bet on a bounce in oil prices.

“We need to wait to see how this new variant develops. My gut feel is that this is a big buying opportunity," said Jean-Louis Le Mee, the firm's co-founder.

Still, not everyone is sanguine. Tim Pickering, chief investment officer at Auspice Capital, a Canadian computer-driven commodities-focused fund, reduced equity exposure on Friday.

"I think the biggest takeaway is the market is fragile and we should expect volatility,” he said.

The Cboe Volatility Index, Wall Street's most widely followed fear gauge, was down on Monday but still elevated from its range over the last couple of months.

Steven Oh, head of credit at PineBridge Investments, said the Omicron variant has introduced more risks to the downside on the heels of the market’s sharp rally.

“If you have less confidence in the base case you may get a bit more defensive in positioning,” he said.

While there may be hopes that the virus may not be severe as initially thought, it shouldn't be dismissed, others warned.

Omicron "definitely has the potential to change the game globally," said Grant Wilson, head of Asia Pacific at Exante Data, who said other factors such as transmissibility and vaccine evasiveness needed to be taken into account.

Indeed, the Financial Times on Tuesday quoted the chief executive of Moderna (NASDAQ:MRNA) as saying existing vaccines would be less effective at fighting Omicron. S&P 500 e-mini futures were trading lower. [nL4N2SL1R3]

Wilson said large asset managers take time to make decisions and he expected a lot of investment committee meetings would be scheduled where a key question would be if the outlook for 2022 has changed.

How central banks respond to the threat is also key. U.S. Federal Reserve Chair Jerome Powell on Monday warned that the new strain muddies the outlook.

"The question now is does the Omicron variant mean that the Federal Reserve won’t hike rates next year?" said Troy Gayeski, chief market strategist for FS Investments, who still sees rate hikes on the horizon and thinks there will be a near-term peak to the market sometime between mid-January and April.

YEAR END NEARS

Despite the concerns, big Wall Street firms including BlackRock (NYSE:BLK) and Citi advised clients to stay invested or buy on weakness.

BlackRock’s analysts on Monday said if vaccines prove effective “the strain only delays the restart of economic activity," while Citi analysts said while "a market sell-off seems logical" it "would buy into any dip."

Others have noted that stocks managed to move higher in the face of the Delta variant this year. The S&P 500 is up about 10% since early May, when the WHO designated the variant now known as Delta a "variant of concern." Graphic: The U.S. stock market and the Delta variant, https://fingfx.thomsonreuters.com/gfx/mkt/akvezmdaypr/Pasted%20image%201638209351790.png

However, a strong year in markets may mean some investors will look to protect their profits as year-end nears, rather than assume more risk.

The average hedge fund, for example, ended October up 11.4% for the first 10 months of the year, according to data from Hedge Fund Research, compared to an 11.8% gain for all of 2020. The S&P is up 24% year-to-date.

Marc LoPresti, co-managing director of alternative investment management firm The Strategic Funds, said hedge funds had already taken off some riskier positions as the COVID-19 situation deteriorated last week in Europe to protect gains going into year-end.

"They did the majority of the derisking, (but) they may do some more," LoPresti said.

Analysis-Ready to pounce: Investors prepare for swings, opportunities as Omicron variant spreads
 

Related Articles

Top EU banks to publish 'pioneering' climate data
Top EU banks to publish 'pioneering' climate data By Reuters - Jan 24, 2022

By Huw Jones LONDON (Reuters) - Large banks in the European Union will have to show how they help or hinder the bloc from meeting climate goals by publishing "pioneering"...

Brazil's sliding stock market makes M&A targets
Brazil's sliding stock market makes M&A targets By Reuters - Jan 24, 2022

By Carolina Mandl and Tatiana Bautzer SAO PAULO (Reuters) - A frenzy of talks for mergers and acquisitions has caught some Brazilian bankers off-guard in the early weeks of 2022. ...

Volkswagen meets European CO2 emissions targets
Volkswagen meets European CO2 emissions targets By Reuters - Jan 24, 2022

BERLIN (Reuters) - Volkswagen (DE:VOWG_p)'s carbon emissions from passenger vehicles in 2021 were around 2% under the European target limits at 118 grams per kilometre, according...

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Comments (3)
Chris Sundo
Chris Sundo Dec 02, 2021 12:16AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
I prefer a follow-through tomorrow THU morning, gap-down at the opening with a reversal soon after.
Jim Si
Jim Si Dec 01, 2021 3:04PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Me thinks someone is minipulating that market for our loss and their gain.
jason xx
jason xx Nov 30, 2021 5:20AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Blackrock and citi don't tell you what they advise private clients. If they did then what are private clients paying when they can read the news to get the same advice.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
or
Sign up with Email