The benchmark S&P 500 index took a hit late last week after the World Health Organisation dubbed Omicron a “variant of concern”. But Cerity Partners’ Jim Lebenthal has a threefold thesis on why investors should stay in the market.
1. Vaccines and other treatments
Lebenthal says the impact of the pandemic on the economy is based on hospitalisation and deaths. Now that vaccines and other treatments seem promising in keeping both metrics under control, he doesn’t expect Omicron to be as gruesome for the market as many fear.
2. Cyclicals might have bottomed
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According to Lebenthal, the benchmark has performed well since May 2021, but most of it was based on the strength in the mega-cap technology names. Cyclicals or value stocks, on the other hand, have been the laggards, which “leaves a lot of room for catch up,” he noted.
3. Aftershocks are less impactful
Lebenthal sees the Omicron news as an aftershock of the original seismic event – the onset of the Coronavirus pandemic. On CNBC’s “Halftime Report, he said:
It’s not unlike EU threatening to blow apart after the financial crisis. There are aftershocks whenever you have a seismic event. They have a lessening impact; their shock value wanes over time. That’s what is going to happen with Omicron.
Stephen Weiss’ outlook
Short Hills Capital Partners’ Steve Weiss also agrees there’s no reason to sell in a rush yet. He, however, warned that if the new variant proves deadlier than Delta, it could fuel supply constraints again and weigh on the market.
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