I wanted to start this post by saying how Christmas came early to Wall Street, and how I wasn't a bit surprised, but then came Omicron.
Not only did the Dow Jones Industrial Average Index (INDEXDJX: .DJI) dropped 2.53% apiece, but I am afraid that we might see another drop, once new strain of Covid 19 (also called COVID 21) is confirmed in the U.S.
Now the question on every investor's lips is, will the November scare continue for the rest of the year?
A survey of our experts revealed that few are willing to take profits at the risk of missing out on any further gains this year. Realistically, I do not expect stock prices to appreciate as robustly as they did till the last days of November. If December does indeed prove jolly for investors, some gains could be given back early in the new year.
So ,what is happening now is the same thing that happened in March 2020, just on a smaller scale. Travel (BKNG,EXPE,RCL...) stocks are going down while top performers are pharma stocks such as Moderna(MRNA) and Pfizer (PFE). The sequal, and we will see the sequal, is going to hit the theaters once Omicron strain hits USA grounds. Now I am not going to talk about how dangerous this strain is because this doesnt matter and no one knows this right now. The psychologial blow will push markets further down, and investors might find cash more attractive than stocks in December.
My analysis of earnings, stock valuations and investor sentiment continues to tell me that the market is expensive right now. And investors had better watch out , as I foresee a pullback in early December as a result of some profit-taking and negative earnings preannouncements.
One of my insiders in travel industry (online booking) told me that bookings in 4th quarter are 50% lower compared to 3rd quarter 2021. This is the same kind of situation that happened last year, which brings me to conclusion that both BKNG and EXPE are overpriced at this moment. The are basically living off of 3 summer months.
The uncertainty due to the corona fears was also noticeable on the oil market, as the collapsing oil prices show. The shares of the industry giants Chevron, ExxonMobil and ConocoPhillips sagged in the wake of this by 2.3 to 4.5 percent. During the first corona wave in spring 2020, oil prices had already fallen drastically due to the closure of many areas of economic life.
But there were also winners of the current development - and these included some of the well-known "stay-at-home stocks" that were coveted during previous lockdowns, but had a difficult time with investors in recent months during the more relaxed infection situation. The shares of the video conference provider Zoom and the fitness specialist Peloton were particularly noticeable here, with price gains of 5.7 percent each.
Ultimately, I recommend bypassing index funds in favor of the diversified financial, pharmaceutical, biotech, media and information-technology sectors.