A new COVID-19 strain is sending stocks plunging, but here’s why investors shouldn’t panic, says this analyst
A new $900 billion coronavirus stimulus deal has finally been struck — but U.S. stocks look set to tumble at the open.
Fears over a new strain of the coronavirus that causes COVID-19, discovered in the U.K., have spooked investors at the beginning of Christmas week. The U.K.’s health minister Matt Hancock warned that the new strain, said to be highly infectious, was “out of control” as the government scrapped a planned relaxation of the rules over the holiday period. Prime Minister Boris Johnson said the strain could be 70% more transmittable.
A number of European countries, including France, Italy and the Netherlands have suspended all travel to and from the U.K. Italy has also detected a patient with the new strain.
The developments have brought a return to uncertainty, hitting global stocks early on Monday. Despite the COVID-19 aid deal, Dow futures YM00,
In our call of the day, Markets.com analyst Neil Wilson described the market move as near-term volatility and said “corrections of this nature” are to be expected on the road to full vaccine deployment.
“This is the kind of near-term volatility we can expect until the full force of vaccines is felt. There has been a lot of hope already priced in with the vaccine-inspired November rally so we cannot expect a straight line higher for stocks,” he said in a note on Monday.
He added that the rotation trade was unwinding, at least in the U.K., due to tighter measures and travel restrictions, with oil companies BP BP,
With the full impact of the vaccine some months away, Wilson warned investors to be prepared for a rough ride. “The cavalry may be coming but the homesteaders need to batten down the hatches and face another onslaught before they arrive,” he said.
The markets
After closing 0.4%, or 124.32 points, lower on Friday, the Dow Jones Industrial Average DJIA,
The pound GBPUSD,
The chart
Our chart of the day from Fundstrat shows that the percentage of the U.S. with falling cases is at 38% — the highest level since early October, which its analysts said may suggest the third wave has peaked. But they added that the situation in California was “pretty serious.”
The buzz
Biotech Moderna MRNA,
A suggestive tweet by Tesla Chief Executive Elon Musk has led to a discussion about a potential ‘$1-trillion favor’ for Tesla shareholders.
Anglo-Dutch oil major Royal Dutch Shell RDSB,
Pharmaceutical company GlaxoSmithKline GSK,
New York Governor Andrew Cuomo called it “reprehensible” and “grossly negligent” to allow U.K. travelers to fly into JFK Airport without being tested despite a contagious new mutations of coronavirus shutting down London.
Random reads
Couple holds ‘10,000 guest’ drive-thru wedding.
A giant computer-generated version of singer Rita Ora will arrest anyone trying to leave London, a viral Twitter TWTR,
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