All I can say heading into the last weeks of the year is: What a mess.
Charting a course through this for investing is more than a minefield, it is walking through a minefield blindfolded.
What we know for a fact is that oil prices and oil stocks have been completely tethered to the macro issues facing the global economy, and world health.
Let’s go through some of them:
The Fed signaled last week that their bond repurchases will continue their tapering into the New Year, with the end of that line of liquidity coming sometime in March 2022.
Bearish.
In addition, they’ve signaled an additional 3 rate increases in the New Year in order to tackle rampant inflation.
Bearish.
Joe Manchin has indicated that he is a firm ‘no’ on the Build Back Better signature legislation from the Biden administration. That’s 2 trillion dollars of stimulus money for child care, health care, climate change initiatives et cetera that, at least right now, does not seem ready to pass.
Bearish.
And then there’s the ever present pandemic, and it’s latest variant Omicron.
I won’t go into the virology here again because there’s nothing I can say that you don’t probably already know. What seems clear are at least two facts of this new wave of Covid-19: First, it is far more transmissible than any variant that has preceeded it. Second, it looks to be less deadly, and certainly far less deadly to those that have followed vaccination protocols.
But in practical terms, that means that the top line number of confirmed cases of Covid-19 are about to soar, even if the outcomes from those cases won’t resemble other variants Alpha and Delta.
Here in NYC, several shows have been temporarily suspended or entirely closed down – the annual Radio City Christmas Spectacular with the Rockettes, a NYC Christmas tradition if ever there was one, stopped performances 5 weeks before their intended last date. And case numbers haven’t really even begun to spike.
I think it’s hard to believe that the NYC government and other governments around the globe aren’t going to react to those large top line numbers with economically devastating results. These may be temporary, but they sure make positive thoughts about oil and the stock markets difficult during this holiday season.
Definitely Bearish.
I see the markets today acting well. I think it’s a feint. Be prepared for big market reactions to small news about the ‘progress’ of Omicron. When numbers spike, the markets will drop. As statements are made about the effectiveness of vaccines, they might rally back a bit.
But overall, I’m not buying anything this holiday season, except maybe a new TV for the den.
