Israel shocked the world this morning by banning all travel from other countries in response to the ‘Omicron-variant’ of the Covid 19 virus. The behaviour of this variant is largely unknown so it is a little perplexing that a perceived leader in the handling of the pandemic should react so abruptly and without the statistical evidence that a reasonable person would demand. Their actions are more surprising given how ‘pandemic-weary’ the world’s populations are, having been continuously subjected to draconian restrictions by well-meaning health regulators without much concern for the broader economic and social consequences of their actions.
The impending danger is that the majority of governments in the world, who individually and collectively are struggling to let go of the draconian restrictions they imposed on their societies, only to declare defeat as recently as a few weeks ago, feel compelled to follow Israel’s lead!!! Please, please, please don’t do this…
At the beginning of the pandemic on March 3 2020, I correctly analysed the economic impact on markets in this blog and earlier still in January 2020 noted the difficulties established institutions had deciding when to switch off their contingency plans during the SARS epidemic. I argued in March 2020 that the economic impact of Covid 19 could only justify a small market correction of about 2%, which would be temporary and followed by a systematic outperformance of the markets over subsequent months. In fact, the stock markets fell close to 40% but rallied back strongly. At the time I wrote that “…I can confidently assert that after this statistical playtime is
completed the prospect of predicting a 10% decline in stock prices as a
consequence of the Covid19 is statistically zero…” and that “…A feature of the sell off over the past week has been the uniform
disposal of equities without much regard for the sectors/countries most
negatively affected by Covid19 let alone those pockets that may benefit…”
Ready your powder, team, we are headed for another one of these opportunities but again! If the governments collectively shut down the transport and service sectors in an attempt (doomed to failure by the way) to fight Omicron then something close to panic will set into the markets. The panic this time, however, will not be over the virus itself. Rather, it will be driven by the costly actions of governments trying to fight an unwinnable battle .
In any event, the markets look to be weakening for the next week or two. Get ready to buy with your ears back…
1. The government’s resources would be better applied to understanding exactly what the Omicron-variant really represents so that they can make fully-informed decisions. At the beginning of the pandemic the established folk-lore held that the death rate would be 4% and this would affect all age-groups uniformly. Subsequently, it became known that many infections were asymptomatic such that the true death rate is closer to 0.2% or lower and that unhealthy people above 60 are those most likely to succumb. I venture an opinion that if the true statistics were known in advance of the first lockdown orders then there would have been none.
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