Why Omicron is a Bigger Market Risk in 2022 Than People Think
U.S. markets largely shook off fears of Omicron, as seen by the surge in cruise line shares on Thursday despite a general sell-off in the market. But the surge in COVID-19 infections in China beyond the early pandemic peak is leading a strategist to warn of undervalued inflation risk that could weigh on stocks.
During a recent Yahoo Finance Plus webinar, Bianco Research President Jim Bianco argued that China’s zero-tolerance COVID policy could lead to a nationwide shutdown, causing economic repercussions. in the whole world.
“What worries me the most here is that this variant of Omicron mushrooms, and we get millions of cases a day, it’s not necessarily a health risk. But what it is, it’s is anyone who tests positive can’t go to work for 10 days, and we have a huge absenteeism rate. And that really comes home to China, because China has a zero COVID policy. They’re locking down everyone and lock you at home for weeks until COVID goes away,” Bianco says.
The latest inflation figures revealed on Thursday that producers are facing a 9.7% rise in overall input prices over the past year, with a 20.2% rise in raw material prices. As the Federal Reserve slows its pace of asset purchases (QE), it also recently signaled that it will shrink its balance sheet sooner than expected. And during Thursday’s confirmation hearing for the Fed’s vice-chairmanship, Lael Brainard said the Fed had a powerful “tool” to fight inflation.
Bianco argues that another surge in inflation only accelerates the Fed’s dilemma over tightening monetary policy at the expense of growth. A poll conducted during the webinar asked respondents what their biggest concern was about the investing landscape in 2022. Of the 208 respondents, 59% said inflation was their top concern, followed by regulatory risk (19 %). Geopolitical risk, political risk and health risk each received less than 10% of the vote.
But it was investors’ relative disregard for health risks that most alarmed Bianco, though the poll is admittedly unscientific.
“If we don’t worry about health issues, I won’t stop ordering Amazon boxes. I won’t stop ordering things I want. They’ll have a harder time filling that. Because look what’s happened at United Airlines at Newark Airport a few days ago. A third of their staff have reported sick because they tested positive for Omicron,” Bianco said.
Jared Blikre is a presenter and market reporter on Yahoo Finance Live. follow him @SPYJared. Devan Burris is a producer for Yahoo Finance Live.
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