The Omicron Obfuscation
Here we go again.
Alarming headlines about COVID-19’s Omicron variant have jolted the markets.
Stocks are down. Oil is down. Treasurys are up. Gold is up. Volatility is up.
We’ve seen this cycle play out with each new variant and each new wave of infection throughout the pandemic since it first struck in early 2020.
- I’m not a virologist, epidemiologist or public health expert ... but I have spent the last quarter-century closely following financial markets.
In doing so, I’ve learned a few things about selling squalls like this as a result. So today, I’m going to share my best take on this iteration — and what you should consider doing about it as an investor.
Start with the catalyst: the Omicron COVID-19 variant outbreak.
The World Health Organization (WHO) has deemed it a “variant of concern,” with scientists pointing to its high level of mutations and potentially higher transmissibility.
Some fear it will be resistant to existing vaccines and treatments, or that it will be more dangerous than the Delta variant and its predecessors.
Those concerns pulled the rug out from under the markets right after Thanksgiving.
- The Dow plunged 905 points on Friday, its worst day of 2021. The broader S&P 500 shed 2.3%.
Stocks rallied back modestly on Monday, but that bounce was followed by another selling squall on Tuesday. Gold prices firmed up and stabilized around $1,800 an ounce … more than a hundred bucks higher than March lows.
- As for interest rates, intermediate-term and long-term ones gave up several weeks of gains.
In fact, the yield on the 30-year Treasury bond slumped to 1.8%. That’s close to its lowest level for 2021 despite red-hot inflation readings, the imminent rollback of the Federal Reserve’s quantitative easing (QE) and potential 2022 rate hikes.
So what should investors like you do in response?
I hope I don’t sound like a broken record ... but stick with “Safe Money” investing strategies!
With COVID-19 concerns intensifying, the long-term bull market in precious metals is not going anywhere.
The “low forever” interest rate world? With the latest variant worries, in addition to the longer-term demographic, structural and debt dynamics I’ve discussed before, it means that’s not going anywhere, either.
Moreover, governments aren’t going to resort to full-fledged lockdowns we saw last year. Citizens simply won’t put up with it.
That should prevent the kind of out-of-control, cascading market collapses we experienced in the spring of 2020.
- What’s the result? You need to keep fighting back as an investor!
- Keep investing in higher-yielding stocks with rock-solid fundamentals and attractive Weiss Ratings.
- Keep maintaining a higher-than-average allocation to gold, silver and mining shares.
- Keep focusing on alternative strategies for income generation, like selling options and crypto-based investments.
Those strategies should offer some downside protection when variant news strikes. And they should also outperform to the upside when panic subsides, given the interest rate and economic backdrop.
You can get my favorite, specific recommendations here. Or, at the very least, just keep those general principles in mind … regardless of how bad (or not) Omicron turns out to be!
Until next time,