It may have been a half day in markets on Friday, but it was an eventful one. Reports of a new Covid-19 variant emerging in South Africa led to sharp selling risk assets. The initial fear is that given the high number of mutations, vaccine efficacy and prior immunity from infection could be greatly diminished with the new variant. Over the weekend, headlines leaned toward walking back this “doomsday scenario”, though the path forward will likely become clearer as data is collected over the next couple of weeks.
· Front month WTI finished the day down 13%, before rebounding on Monday
· The Russell 2000 was down more than 6% intraday, before a tepid rebound in the afternoon and on Monday
· 2-Year Yield plunged - a full 2022 rate hike has been priced out of the market.
The kneejerk reaction to the news in markets has been to sell economically sensitive risk assets and buy safe havens. Whether this trend continues is likely a function of 1) does the virus evade vaccination/prior immunity 2) how severe is the virus compared to previous variants in terms of hospitalizations/deaths. The data that emerges over the next few weeks will paint a clearer picture, hopefully for the better.
Have any questions? Feel free to reach out to Gary@invariantinvestments.com.