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Ahead of Wall Street

Friday, November 26, 2021

A new, highly infectious variant of the Covid-19 coronavirus has been discovered in South Africa, and cases are already showing up in places as far away as Israel. With a reproduction level of 2 (anything above 1 represents exponential epidemic capacity), this new strain — currently called B.1.1.529 — threatens the global marketplace anew, just as economic conditions around the world were beginning to get their footing following the Delta-variant fallout.

Countries from Japan to England and half a dozen others are now banning flights from South Africa and surrounding regions, in hopes to keep most of this new variant localized, but this is an all-hands-on-deck moment for the global market, and indexes here in the U.S. are reacting accordingly: the Dow is -800 points at this hour, the S&P 500 is -80 and the Nasdaq is -150 points right now.

The sell-off goes beyond equities, as well. Crude oil is -6% on the WTI and Brent, and cryptocurrencies are currently down double-digits. Among stocks, those recently striding forward on reopening news are being hit the hardest: Norwegian Cruise Lines NCLH is -10% at this time, TripAdvisor TRIP is -9% and United Airlines UAL is -8%. Those companies that most benefited during pandemic conditions are ramping back up: Zoom Video ZM is +10% and Peloton PTON is +7%.

The Covid vaccine pharma companies are already at work on this, with Moderna MRNA CEO Stephane Bancel saying his company could have a new vaccine trial up in two months, with a few months for manufacturing added on, depending on the results. BioNTech BNTX, the biotech firm responsible for the Pfizer PFE-credited vaccine, said they’ll be testing drugs in the next two weeks and would expect six weeks on trial and production.

Most worrying here is that the breakout in South Africa is among a population normally considered safely immunized from Covid (through previous contact with the coronavirus more than high vaccination rates), meaning this highly mutated variant may prove stronger than what we’ve seen in the Delta variant, where vaccinations and therapeutics have proven effective against its spread and hospitalizations from the disease. For the market, it hates uncertainty. We are currently in a state of high uncertainty regarding this new variant, other than it looks very bad.

As we find out more regarding the spread of the new variant and the effectiveness of existing vaccines and therapeutics on it, markets will likely remain suppressed. Some, as we see, are chasing the “stay at home” stocks once again, but much of this activity may be in order to counter highly leveraged positions currently existing in investors’ portfolios. For now, we advise holding tight and keeping eyes and ears open to reputable news reporting. The stock market closes at 1pm ET today, as already scheduled for “Black Friday” and Thanksgiving Weekend.

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