(Yahoo!Finance) - The bull market of 2021 may be on temporary hold as investors assess the economic risk from the new Omicron variant of COVID-19, warns Goldman Sachs.
"We think a broad risk recovery may be impeded in the near term by the need to digest the prospect of a more hawkish Fed and a less consistent cyclical tailwind. Ironically, the Omicron scare itself may now create the best possibilities for relief in the coming weeks, either because incoming news is better than feared or because it prompts monetary policymakers to take a more cautious stance toward tightening," said Goldman Sachs strategist Dominic Wilson in a note on Monday.
Traders nervously tiptoed back into the markets Monday after the Dow Jones Industrial Average plunged more than 1,000 points the day after Thanksgiving. The violent sell-off transpired as reports of the Omicron variant spreading to more countries — leading to numerous fresh travel bans — took hold. Concerns mounted on the effectiveness of COVID-19 vaccines from Moderna, Pfizer and Johnson & Johnson against Omicron and other potential mutations.
The small-cap Russell 2000 Index saw its largest one-day drop since February on Friday, Wilson points out. Front month oil prices tanked 13%. The U.S. rates markets shifted from pricing in about three rate hikes in 2022 to pricing in less than two.
Brian Sozzi
Anchor, Editor-at-Large
