Variants & the Stock Market
The Omicron Variant: Financial Impacts, Market Volatility & What Comes Next
If “new normal” was the phrase of 2020, “new variant” is the phrase of 2021. As we have yet to establish herd immunity or get vaccines to every country on the globe, variants of the COVID-19 virus have emerged throughout the year. Some have gained more public attention than others, and currently, the “Omicron” variant is in the spotlight.
While most variants seem to be more contagious, their symptoms have generally been less intense. Coupled with improved treatments, increased vaccination rates, and enhanced medical response, the variants—so far—haven’t required full-blown lockdowns reminiscent of March 2020 (knock on wood).
But, as you surely know by now, we’re financial professionals—not doctors. While we’re not qualified to discuss virus variants in detail, we can share our perspective as financial planning and investment management experts on how COVID-19 variants like Omicron affect the markets.
Market Volatility and Omicron's Arrival
Omicron was announced in late November 2021, and investors immediately questioned what impact ensuing travel restrictions, mask mandates, and lockdown fears might have on the markets. Volatility surged. The S&P 500 saw swings of over 1% in the six days that followed the announcement, and the Volatility Index (VIX) jumped from 18 to nearly 29 overnight. It has remained elevated since.
Market volatility is likely to remain high—a safe bet, perhaps, but it’s helpful to consider what that might actually mean. A look at the S&P 500’s early-pandemic performance offers some context, though it’s important to remember that past performance doesn’t guarantee future results. Still, we’ve observed a consistent pattern: each new variant announcement tends to spike short-term investor anxiety.
Chicken or the Egg?
Beyond initial fears, COVID-19 variants like Omicron impact the economy through policy and behavior changes. New restrictions—whether on travel, commerce, or workplace operations—strain the supply chain and exacerbate ongoing labor shortages. These effects ripple across industries and influence consumer prices.
At the same time, some investors are stepping back from equities over broader economic concerns, such as speculation about a bubble in overvalued stocks. Combine that with record-high inflation and the Fed’s move toward tapering and eventual interest rate hikes, and you have a convergence of economic headwinds—all capable of fueling volatility independent of any variant. It’s a complex “chicken or the egg” cycle where investor behavior, economic fundamentals, and headlines feed off each other.
What Comes Next?
As 2021 comes to a close, Omicron might be the most prominent headline, but it’s far from the only factor shaping the market. If you’re looking for clear insight and a data-driven forecast for 2022, join us for the NEST Edge webinar on Wednesday, December 15th. Sean and Gloria will break down the current market environment and how we’re adjusting our outlook going forward.
In the meantime, enjoy the holidays, and remember: volatility is part of the investing landscape. Market swings—regardless of headlines—are normal, and investing success requires a long-term, steady hand. If you’d rather focus on enjoying the season while a team of professionals manages your portfolio, reach out to us at info@nestfinancial.net to schedule a no-obligation consultation.
Let your money work just as hard as you do—and take comfort in knowing you don’t have to go it alone.
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DISCLAIMER: We are legally obligated to remind you that the information and opinions shared in this article are for educational purposes only and are not financial planning or investment advice. For guidance about your unique goals, drop us a line at info@nestfinancial.net.