Call Us (904) 346-3460
 In The Lonely Bull

Last week, the Bull wrote that the stock market was in the process of cutting a little froth. It looked to be a mild adjustment, but then a new variant (Omicron) of the coronavirus, suddenly emerged. That threw fuel on the flames of a correction, scaring more investors to sell. In addition, the Federal Reserve Chairman testifying before Congress announced an abrupt shift in policy from accommodation to one aimed at reducing inflation; maybe the party was ending!

The Omicron variant of the coronavirus is the fifth we’ve battled after Alpha, Beta, Gamma, and Delta. Each time, the market has reacted less dramatically. We just might be getting used to this. After all, we know very little about Omicron. Typically, viruses become less potent as they mutate. This one may not be nearly as bad as everyone fears, we will soon find out. In the meantime, we have an armory of weapons to combat it. We may need to be adjust some of them, but the good news is that we can.

To investors, the shift in policy by the Fed may be more important than the pandemic fight. We will all have to adjust to less accommodation and eventual monetary tightening, although that is still some distance into the future. The stock market has done very well during other periods of much higher interest rates and a variety of Fed policy stances. In the meantime, the reaction may have been overdone.

The policy shift and the new virus variant caught us a little off-guard. We will get over it. This is a seasonally strong time for the economy and the stock market. Investors’ focus will likely shift back to fundamentals. After all, fear and greed, the Yin and Yang of the stock market, work together to find the appropriate values for assets under all circumstances. Things may not be nearly as bad as first feared; stay steady my friends.

The Lonely Bull

Recent Posts