How Long Will Covid Affect the Market

The Omicron Covid-19 variant is sweeping across the country and the world. It would appear that the Federal and State governments are not so likely to close things down like they did previously. Nevertheless, airlines are cancelling flights because too many workers are sick and this is going on across businesses far and wide. To a large degree businesses have learned to cope with this semi-permanent situation. And, the market as a whole seems to have written this off as the S&P 500 is flirting all-time highs again. To the extent that this variant keeps getting worse and the round of earnings comes in low, that could affect the market. Or, another variant, again, could emerge as well. The question is how long will Covid affect the market?

Will Covid Be Gone in 2022?

The World Health Organization head says that for Covid to subside in 2022 there need to be vaccines available across the entire world. Although billions more doses are being churned out in the USA and a new vaccine in huge quantities in India, the question is whether or not enough vaccinations can be done before one or more new strains emerges and one or more is resistant to the current vaccines. For the options trader there is the usual dilemma. As Americans and concerned people we would like to see this all go away. But as options traders we stand ready to pound the market into the dirt like we did when the Covid Crash hit and again when the Fed opened the floodgates and printed money to stimulate the economy.

Expect the K-Shaped Recovery to Continue

Tech companies like Microsoft did well when everyone had to work from and stay at home. The travel and hospitality sectors were crushed. The upward course of the S&P 500 is largely driven by those same tech companies. While many of the beaten-down companies have started to recover they will be beaten down again every time that a new variant emerges. And, every time the nature of the still-present pandemic changes or threatens to change there will be option trading opportunities for those who are paying attention.

How Do the DRINCs Fit into This Picture?

As we continually remind our readers, Democrats, Russia, Iran, North Korea, and China all have the capacity to cause trouble and roil the market. We just wrote about Russia and a possible (new) invasion of Ukraine. China may use the continued focus of the USA and its allies on the pandemic, the economy, inflation, Russia, and the rest to push to take over Taiwan or further extend their reach into the South China Sea. As they ramp up their military in terms of high tech weaponry, aircraft carriers and the rest, they will soon reach parity with the US forces available to fight to help defend Taiwan or any other target in that part of the world. The longer this lasts the greater the risk with China will be until about a decade out when its demographic risk of too few workers and its ever-increasing debts come to bear. The main concern with its 68 leader is that he hears the clock ticking and may pull the trigger at what he believes to be the optimal time. Watch stocks related to electronics manufacturing or the electronics supply chains as things heat up with China.

The Permanent Virus

If the past two years are an accurate indication, Covid is not Ebola or the Black Death. Fatality rates are low in the young although they up to the 20% range for the elderly. Thus, the human race is not going to be wiped out unless a worse variant emerges. Companies like Moderna and Pfizer are already considering making a combination flu and Covid vaccine for yearly use. The game changer will be if and when a truly effective antiviral antibiotic emerges that kills the Covid virus. Meanwhile, every twist and turn of the virus has the capacity to cause havoc and drive some stocks up and some stocks down thus providing opportunities for options traders.