When world events begin to affect investment markets, we always try to see past the sometimes-unsettling headlines to seek perspective and stay actively engaged with our clients.
Over the past few days, world investment markets have experienced increased volatility related to news of a newly discovered Covid variant. The Omicron variant was recently designated as a “Variant of Concern” by the World Health Organization. First detected in South Africa, the variant has now been found in several countries including Belgium, Israel, Hong Kong, and the U.K.
Media outlets ran story after story, speculating about the possibilities of vaccine resistance and transmission rates. The financial media reported significant movements in commodities, equities, and interest rates. The Wall Street Journal front page headline was, the “Dow Suffers Worst Day of 2021.” Further into the article, and in much smaller print, the decline was identified as a modest 2%. We certainly are not minimizing the news of the latest variant. We should take this, and everything that has the potential to affect health and well-being, seriously.
At this point, the global scientific community doesn’t have enough data to form reasonable and definite conclusions. In the short-term, much of this is out of anyone’s direct control. But that doesn’t mean we sit and wait. One of our core philosophies is that we operate at the intersection of what we do know and what we can control in managing your portfolio.
What we do know
We know that the U.S. and the rest of the world have a highly-technologically advanced infrastructure. The variant was detected, at an apparently early stage, despite being in a country with limited scientific resources. This shows the breadth and reach of the world’s healthcare infrastructure.
We also know that science has already built a strong base to study and defend against mutations of the virus. We’re going to get a little technical, but it is important. The Omicron variant can be studied by a relatively simple process called PCR rather than genomic sequencing, dramatically reducing the time required. Also, the most widely used vaccines are mRNA based. These vaccines can be modified to variants relatively quickly and easily. Two vaccine producers have estimated they may have an Omicron vaccine ready in as little as 100 days if it proves necessary.
Most importantly, we know people and our economy are far more powerful and resilient than anyone could have imagined. We would do well to keep that in mind when making financial decisions.
What we can control
With the news of the Covid variant, markets suddenly lurched in previously unexpected ways. Energy and reopening stocks, which had been buoyed by the continuing recovery, dropped. Bond prices, which some investors had started to give up on, surged higher. That is why we typically design diversified portfolios with several asset classes that are built on long-term goals rather than short-term trends.
Working with you and your risk tolerances, we took into account the uncertainties of the world when we designed your portfolio. While all portfolios are subject to risk and decline, we hope that our commitment to diversification was evident over the past few days.
In a previous investment letter written during the pandemic and recovery, we quoted Helen Keller, who certainly knew about overcoming challenges. Given the circumstances, we think it is worthy of repeating. She said, “Although the world is full of suffering, it is also full of the overcoming of it.”
We are here and ready to help you through whatever comes. We are always happy to hear from you so please feel free to reach out with your thoughts.