How the Stock Markets Might React to Omicron

How the Stock Markets Might React to Omicron

December 24, 2021

It is likely that volatility will remain elevated, but maybe history can help

The omicron-variant was first announced in late November and since that time, there has been a lot of media and market noise as to whether it will derail markets or not. More specifically, investors are asking what the impact of renewed travel restrictions, mask mandates, and potential lockdowns – right in the middle of the busy shopping season – might be for Wall Street.

Since the announcement of the omicron-variant, Wall Street has certainly seen a spike in volatility, as the S&P 500 has recorded gains and losses of more than 1% in six trading days in a row. And two days before news of the omicron-variant hit our shores (Wednesday, November 26th) the VIX (a volatility index aptly named the Fear Index) was hovering right around 18.25 as it had for most of the month. Then on Friday the 26th, the VIX spiked to 28.62 and it has remained in the mid-20s since.

The VIX (November 6th – December 7th)

The reality is that we will not know how omicron might impact markets for weeks (or months). And until we know more, volatility is likely to remain high.

But we can look at the history of the S&P 500 during the pandemic to see how markets might behave. Like any performance charts, remember that past performance is never a guarantee of future results.

Source: FactSet

Advice from a Financial Professional

Unless your personal situation has changed, you should avoid the temptation to change your well-thought-out and long-term investment strategies based on what might be short-term noise.

Important Disclosures

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

S&P 500 Index: The Standard & Poor's (S&P) 500 Index tracks the performance of 500 widely held, large-capitalization US stocks.

VIX: This is a trademarked ticker symbol for the Chicago Board Options Exchange Market Volatility Index, a popular measure of the implied volatility of S&P 500 Index options. Often referred to as the fear index or the fear gauge, it represents one measure of the market’s expectation of stock market volatility over the next 30-day period.

All information is believed to be from reliable sources; however LPL Financial makes no representation as to its completeness or accuracy.

This article was prepared by FMeX.

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