Omicron Takes Hold Overseas, Current Equity Market Drivers, and Bond and Commodity Woes
November 30, 2021 | FIRESIDE CHARTS
Welcome back! After setting yet another all-time high, the sudden emergence of the new Omicron Variant threw markets into turmoil. A new variant shouldn’t be a shock. Preliminary data says the variant is less likely to spread serious disease but is even more virulent than Delta. It is unclear if the current vaccines will work against Omicron. We all know what we need to do, the question is only will we have the resolve to do it?
So, let’s move on…
Below we see a glimpse of what has been driving this spectacular market. Bonds have had an ugly year so far, and risk assets are feeling the recent volatility. Meanwhile, Germany and the rest of Europe are showing the same inflationary effect as here in the U.S.
1. The S&P 500 set a new record high last week so an ordinary pullback is not a concern!
Source: Thechartstore.com from 11/26/21
2. While falling in the headlines due to fatigue, the Delta variant is already wreaking havoc. Here is Germany:
Source: Center for Systems Science and Engineering (CSSE) at John’s Hopkins University (JHU) as of 11/29/2021
3. Here is the U.K.:
Source: Center for Systems Science and Engineering (CSSE) at John’s Hopkins University (JHU) as of 11/29/2021
4. What has been driving this market rally? First, cash inflows:
Source: BofA Global Research, Bloomberg
5. Second, stock buybacks:
Source: @hsilverb, h/t @Callum_Thomas
6. Third, ultra-low rates have left little competition for capital from bonds:
Source: Thechartstore.com from 11/26/21
7. Finally, Pent-up demand. The U.S. consumer held off on much for ~18 months:
Source: TheDailyShot from 11/29/21
8. The do it yourself crowd has only experienced a raging bull which has made everyone “look smart”. How will they react when the markets are not so kind? Options and margin…what could go wrong?
Source: @financialtimes
9. We may see a lot more of this going forward as rates “normalize”:
Source: BofA Global Research
10. Remember, when market volatility strikes, it tends to affect all risk assets at the same time; Stocks, commodities, coins, even gold…
Source: TheDailyShot from 11/30/21
11. German inflation has reached 6% along with the rest of the Euro zone:
Source: TheDailyShot from 11/29/21
Disclosure: The charts and infographics contained in this blog are typically based on data obtained from 3rd parties and are believed to be accurate. The commentary included is the opinion of the author and subject to change at any time. Any reference to specific securities or investments are for illustrative purposes only and are not intended as investment advice nor are they a recommendation to take any action. Individual securities mentioned may be held in client accounts. Past performance is no guarantee of future results.