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Monday, November 29, 2021
I am not a doctor. I will venture to say that most of you reading this aren't doctors, either.
So all we could collectively do after Friday's market beatdown is assess incoming information on the Omicron variant to the best of our ability and go from there.
Here's the current state of play in this fast-changing COVID-19 news cycle:
Moderna thinks it may be able to develop a new vaccine to fight the Omicron variant by early 2022. “If we have to make a brand new vaccine I think that’s going to be early 2022 before that’s really going to be available in large quantities,” said Paul Burton, Moderna's chief medical officer, in a Sunday BBC interview. Moderna stock was up 20% on Friday. Hot take: I think this commentary may alleviate a little of the angst among medium to longer-term investors, with the emphasis on a little.
Dr. Anthony Fauci told "Face the Nation" on Sunday the U.S. "has the potential to go into a fifth wave" of the pandemic. Hot take: Obviously worrisome, and will only fuel the near-term bearish narrative.
Travel restrictions are on the rise from developed economies as officials run their COVID-19 protection playbooks. CNN has a solid breakdown of where the travel bans have kicked in. Hot take: Here comes talk of lockdowns. "If border restrictions are not effective and variant characteristics are as bad as some fear, there is risk more lockdowns will be needed to avoid overrunning health systems, at the very least in affected regions. Some health departments may lean towards taking early precautionary action to avoid much greater economic risks down the track," points out JPMorgan's research team.
On Sunday, Germany and Italy confirmed their first Omicron cases. Hot take: Those reports will feed the short-term bear take that COVID mutations are spreading quickly and are resistant to current vaccines.
In the near-term, we are likely to witness a sell first, ask questions later type of backdrop for the stock market. The bull thesis on stocks — a global economic awakening powered by COVID-19 vaccinations — is temporarily on hold. If you own airline stocks such as Delta Air Lines and JetBlue Airways, more pain is probable. Same goes for hotel stocks Hilton and Marriott. The hedges here are the pandemic plays like Zoom and Moderna.
The S&P 500 entered these latest COVID concerns trading on a P/E ratio two points higher than two years ago. Investors forgot the pandemic is still very much with us, and will be for some time to come. Now these excesses need to be worked off.
"The pandemic and variants remain one of the biggest risks to markets, and are likely to continue to inject volatility over the next year(s). It’s hard to say at this point how lasting or impactful this latest variant will be for markets," Keith Lerner, Truist's co-chief investment officer, told me via email.
Black Friday was OK, relax: Covering Black Friday live for Yahoo Finance in Herald Square was a joy again, for the most part. I saw more people were out and about (including tourists thanks to the travel ban being lifted), compared to a largely vacant New York City on Black Friday 2020. Crowds grew nicely throughout the day (I saw this continue into the weekend at the malls I visited), which appeared to be the theme elsewhere in the country on Black Friday, per my sources. So from that aspect it was a joy to be in the middle of it all (which included this rendition of "Jingle Bells" from a young Yahoo Finance fan).
But make no mistake, this is not the holiday season pre-pandemic. The pandemic has forever changed how we consume goods and services, full stop. Hence, don't expect to see people leaving stores in November and December en masse holding 15 shopping bags and then stampeding into another store, exiting with 15 more bags. So from that perspective covering Black Friday wasn't a joy, as the sizzle and thrill is gone for good. I am seeing shoppers this year being more surgical in their purchases at stores such as Macy's, J.C. Penney, Gap and Nordstrom as they likely try to sidestep inflation and the pandemic by buying things online (or so shoppers told me). To that end, some are voicing surprise that spending online in the U.S. tallied $8.9 billion on Black Friday, down from $9 billion last year, according to Adobe Analytics. I think this decline is being misunderstood — last year's online sales were huge as the pandemic was raging and people stayed indoors. In other words, comparisons are tough. I will go out on the limb and say the holiday season has started a lot stronger than people realize as consumers release their pent-up savings on family members or themselves. With prices higher year-over-year and what could be strong volume, there will be plenty of retail winners this holiday season. A few that are top of mind based on what I am seeing and hearing: Tapestry (owner of Kate Spade and Coach); Movado; PVH; Nike; Best Buy; Apple (shocker, I know); Levi's.
Rivian:Amid Friday's brutal session for the markets, Rivian's market cap dipped below $100 billion (Ford's market cap is $79 billion and GM's market cap is $87 billion). I would say nothing has changed on the Rivian story compared to two weeks ago, it's just that the market is going to sell unproven companies with inflated valuations such as Rivian first in uncertain economic times and ask questions later. If you are a Rivian bull and own the stock (or have been watching from the sidelines waiting for a pullback... which has now happened), give this new review by YouTuber Doug DeMuro a watch. Doug is arguably the most thorough person reviewing autos on the internet, and he nicely sliced and diced Rivian's Amazon blue electric pickup truck. My takeaway: Rivian is legit. Whether it's worth nearly $100 billion two weeks after its IPO is a different debate for another day.
