A few weeks ago, it seemed like a 'Goldilocks' type of situation for the stock market. Q3 earnings had exceeded the expectations of even the biggest bulls with 39.6% earnings growth, while analysts were looking for 24% growth entering earnings season. Given this, it's not surprising that the stock market was quite strong with new highs in many indices and expectations of continued strength into what is typically a seasonally, bullish time of year in December and January.
Of course, this bullish picture has been tarred by the identification and rapid spread of a new variant of the coronavirus which was initially identified in South Africa. Part of the problem is uncertainty as we simply don't have enough data to make conclusive statements about the nature of the virus in terms of its danger and contagiousness. However, early indications seem to be that the variant is evading vaccine antibodies and is very contagious but seems to be less lethal for unvaccinated people and quite mild for vaccinated people.
Some are speculating that the omicron variant could actually herald the end of the pandemic. Many pandemics have ended in the past with less virulent and more contagious strains becoming dominant. Further, the pharmaceutical industry has shown it's quickly capable of developing new and effective vaccines, and there has been significant progress in terms of treatments that have further reduced the coronavirus death rate.
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They see the risks being less about the virus and more about governments putting back on onerous restrictions on travel, gatherings, etc. Given their view that the omicron strain is a potentially positive development, they are in favor of investors buying value stocks and reopening stocks, while selling "work from home" stocks.
