The coronavirus is in the news again, not last year’s pandemic fueling COVID-19 version, but the fast-spreading Delta variant. While dominating the mainstream news in the United States (See CNN and FoxNews), and globally on business website such as CNBC, Reuters and Bloomberg, to name a few, we’re not really seeing a major impact on the financial markets.
This is interesting to note because the mainstream story is centered on rising infection numbers, the slow pace of vaccinations and what is likely to happen if countries don’t start clamping down on the spread of the virus. In other words, people’s health. Some experts are even calling it a “life or death” situation.
In the financial markets, obviously we’re not seeing the same reaction as we did in 2020 with stocks dropping 20% in a matter of weeks and crude oil testing prices below $20 a barrel. Instead we’re seeing a relative calm.
Is this telling us to “follow the money?” Is this telling us that since the situation is not as bad as last year, there is no need to panic? Are the financial markets indicating there is not enough information yet to understand the impact of this new outbreak? Do we wait for the bad economic numbers or do we anticipate them?
The answer is all of the above.
Of course, I don’t recommend putting your finances ahead of your health. I don’t think anyone is doing that. Traders are making their decisions on what they know at this time. Some are even basing their decisions on their belief in the vaccinations.
In this case, they feel that enough people are vaccinated so major economic shutdowns are warranted at this time. But we’ve seen different reactions all around the globe, which could be adding to the confusion over what to do. Lighten up on the long side? Buy more, start selling? Move to the sidelines?
I don’t think I am going to be able to answer any of these questions in this article, but if I had to center on one, I’d have to say “follow the money”. But I should add that I am vaccinated, so I may be biased.
Here’s What Others are Saying and Doing
Fed’s Powell Downplays Delta Variant’s Threat to the Economy
The spread of the COVID-19 delta variant is raising infections, leading some companies and governments to require vaccinations and raising concerns about the U.S. economic recovery, according to the AP.
But on Wednesday, Federal Reserve Chair Jerome Powell injected a note of reassurance, suggesting that the delta variant poses little threat to the economy, at least so far.
“What we’ve seen is with successive waves of COVID over the past year and some months now,” Powell said at a news conference, “there has tended to be less in the way of economic implications from each wave. We will see whether that is the case with the delta variety, but it’s certainly not an unreasonable expectation.”