Despite some comments over the weekend about omicron’s mild symptoms, the new virus variant appears to be a serious concern given its association with higher transmissibility and immunity neutralisation. While there is still much uncertainty about its other characteristics such as mortality risk, this news has the potential to be a game-changer for the near-term macro and market outlook - and should be treated as such. This is one of the risks we flagged in our latest 2022 outlook, aptly titled Catch-2022.
The speed of policy reaction has been notable with a number of countries imposing travel bans from South Africa within a matter of hours. Learning from mistakes in dealing with the delta variant, policymakers seem to be showing determination to act preemptively.
While it's possible (but far from certain) that the existing vaccines might still be effective or can be tweaked in a matter of weeks or months to fight the new variant, to limit its spread before this happens, more stringent domestic and international mobility restrictions might return as we head into the end of the year. The degree of stringency will likely vary across countries depending on the spread of the new variant and emerging new information on the degree of its vaccine resistance, but also on the political appetite to cause more economic damage or risk social unrest.
Global growth risks have already been skewed to the downside, with a slowing Chinese economy and global energy crunch as the key headwinds. The new virus variant adds further uncertainty to the macroeconomic and policy outlook over the next few months. With inflation likely to stay sticky at elevated levels, and further supply chain disruptions potentially pushing it even higher, central banks are facing an ever more challenging policy dilemma.
In the interest of protecting growth and labour markets, some hawkish rhetoric from the likes of the Federal Reserve and the Bank of England might have to be scaled back, at least until the new variant reveals its cards. For markets, this festive season might turn out to be more volatile than investors have been expecting, potentially creating opportunities in areas where valuations have previously appeared stretched.
Important Information
This document is for Investment Professionals only and should not be relied on by private investors.
This document is provided for information purposes only and is intended only for the person or entity to which it is sent. It must not be reproduced or circulated to any other party without prior permission of Fidelity.
This document does not constitute a distribution, an offer or solicitation to engage the investment management services of Fidelity, or an offer to buy or sell or the solicitation of any offer to buy or sell any securities in any jurisdiction or country where such distribution or offer is not authorised or would be contrary to local laws or regulations. Fidelity makes no representations that the contents are appropriate for use in all locations or that the transactions or services discussed are available or appropriate for sale or use in all jurisdictions or countries or by all investors or counterparties.
This communication is not directed at, and must not be acted on by persons inside the United States and is otherwise only directed at persons residing in jurisdictions where the relevant funds are authorised for distribution or where no such authorisation is required. Fidelity is not authorised to manage or distribute investment funds or products in, or to provide investment management or advisory services to persons resident in, mainland China. All persons and entities accessing the information do so on their own initiative and are responsible for compliance with applicable local laws and regulations and should consult their professional advisers.
Reference in this document to specific securities should not be interpreted as a recommendation to buy or sell these securities, but is included for the purposes of illustration only. Investors should also note that the views expressed may no longer be current and may have already been acted upon by Fidelity. The research and analysis used in this documentation is gathered by Fidelity for its use as an investment manager and may have already been acted upon for its own purposes. This material was created by Fidelity International.
Past performance is not a reliable indicator of future results.
This document may contain materials from third-parties which are supplied by companies that are not affiliated with any Fidelity entity (Third-Party Content). Fidelity has not been involved in the preparation, adoption or editing of such third-party materials and does not explicitly or implicitly endorse or approve such content.
Fidelity International refers to the group of companies which form the global investment management organization that provides products and services in designated jurisdictions outside of North America Fidelity, Fidelity International, the Fidelity International logo and F symbol are trademarks of FIL Limited. Fidelity only offers information on products and services and does not provide investment advice based on individual circumstances.
Issued in Europe: Issued by FIL Investments International (FCA registered number 122170) a firm authorised and regulated by the Financial Conduct Authority, FIL (Luxembourg) S.A., authorised and supervised by the CSSF (Commission de Surveillance du Secteur Financier) and FIL Investment Switzerland AG. For German wholesale clients issued by FIL Investment Services GmbH, Kastanienhöhe 1, 61476 Kronberg im Taunus. For German Institutional clients issued by FIL (Luxembourg) S.A., 2a, rue Albert Borschette BP 2174 L-1021 Luxembourg.
In Hong Kong, this document is issued by FIL Investment Management (Hong Kong) Limited and it has not been reviewed by the Securities and Future Commission. FIL Investment Management (Singapore) Limited (Co. Reg. No: 199006300E) is the legal representative of Fidelity International in Singapore. FIL Asset Management (Korea) Limited is the legal representative of Fidelity International in Korea. In Taiwan, Independently operated by FIL Securities (Taiwan ) Limited, 11F, 68 Zhongxiao East Road., Section 5, Xinyi Dist., Taipei City, Taiwan 11065, R.O.C Customer Service Number: 0800-00-9911#2 .
Issued in Australia by Fidelity Responsible Entity (Australia) Limited ABN 33 148 059 009, AFSL No. 409340 (“Fidelity Australia”). This material has not been prepared specifically for Australian investors and may contain information which is not prepared in accordance with Australian law.
ED21 - 164
