Saqib Iqbal Ahmad

NEW YORK, (Reuters) -COVID-19 is back as a concern for investors. It’s a risk factor that could drive big market movements after a new variant of the virus triggered alarm long after Wall Street had forgotten about it.

Omicron is a brand new virus strain that has been identified by the World Health Organization and is considered a risky variant. It ravaged markets all over the globe and caused the biggest percentage loss in the nine-months. These moves occurred just one day after Thanksgiving in the United States. The lack of volume may have contributed to the losses.

The long-term implications of the new strain for assets in the United States were not clear as there was little information. Investors reported that there are signs the new strain may be spreading. Questions over the resistance of vaccines might also impact on so-called “reopening” trade that helped lift markets in different times this year.

It is possible that the Federal Reserve may be less aggressive in normalizing monetary policies to reduce inflation because of the new strain.

“Markets rejoiced the end to the pandemic. Slam. It’s not over,” David Kotok said, Cumberland Advisors chairman and chief investor officer. All policy matters, including monetary policy and business trajectories as well as GDP growth estimates, leisure recovery, and other issues are being held.

The S&P 500 fell by a third as pandemic fears mushroomed in early 2020, but has more than doubled in value since then, though the pandemic’s ebb and flow has driven sometimes-violent rotations in the types of stocks investors favor. It is now up by more than 22%.

Markets were potentially less susceptible to COVID-19 before Friday due to greater vaccine access and improvements in treatment. Recent BofA Global Research survey showed that the virus had fallen to fifth place on the list of market “tail risk” factors. The top positions were held by inflation and central banks raising interest rates.

Technology and growth stocks which had performed well during the last year’s so called stay-at home trade surged on Friday. These included Zoom Communications, Netflix Inc. (NASDAQ 🙂 and Peloton.

Stocks that have risen this year on hopes of an economic recovery could be hurt by rising virus fear. The stocks of energy, financials and other economically vulnerable stocks fell on Friday as well as those of travel-related companies like airlines and hotels.

On Sunday the Omicron coronavirus variant continued to spread around the globe. There were 13 confirmed cases in the Netherlands, two in Denmark, and one each in Australia.

The new variant was first discovered in South Africa. It has since been found in Britain, Germany and Italy as well as Australia, Israel, Australia, South Africa, Canada, Brazil, Germany, Italy, Denmark, Botswana, Israel and Australia.

Cboe Volatility Index, Wall Street’s fear gauge on Friday, was also affected by Friday’s market swings. This sent options investors scrambling in an attempt to safeguard their investments against future swings.

Andrew Thrasher, portfolio manager for The Financial Enhancement Group, had been concerned that recent gains in a handful of technology stocks with large weightings in the S&P 500, including Apple Inc (NASDAQ:), Amazon.com Inc (NASDAQ:), Microsoft Corp (NASDAQ) – They were masking weaknesses in the larger market.

“This created the opportunity for sellers and to drive markets lower, and the most recent COVID information appears to have stoked this bearish fire,” he stated.

Investors suggested that the recent COVID-19-related weakness might be an opportunity to purchase stocks at relatively lower levels. They expect the market will continue to rapidly recover from dips and this pattern has been the hallmark of its rise to new record highs.

We’ve seen many days of economic despair. In a note to investors, Bill Smead (founder of Smead Capital Management), wrote that each of the optimism crashes were a great buying opportunity. Occidental Petroleum (NYSE) was one of the recommended stocks. Macerich Co (NYSE:) On Friday, the stock fell by 7.2% and 5.2%.

There are many unknowns. One is whether the Federal Reserve will be able to slow its efforts at normalizing monetary policies in light of virus-driven economic uncertainty. The Federal Reserve has already begun unwinding its $120 million a month bond purchasing program.

The U.S. fed funds rate futures, which are short-term interest rate expectation tracks, revealed investors who had shifted their expectations of an earlier-than-expected rate hike on Friday.

Investors will closely follow Fed Chair Jerome Powell’s and U.S. Treasury Sec Janet Yellen’s appearances before Congress in order to discuss the government’s COVID response of Nov. 30, as well as U.S. Employment numbers due out Friday.

Investors hoped that the markets would stabilize. Cresset Capital Management’s chief investment officer Jack Ablin said that Friday’s liquidity shortage may have exaggerated the market moves, as many people were out celebrating Thanksgiving.

Ablin declared, “My first reaction was anything that we will see today is excessive.”