With the market rallying over 40% from its March trough, investors are left scratching their...
Strain of Strains - Weekly Market Update
Investors in the US woke up from the Turkey Coma to the news of a new Covid-19 strain in South Africa.
With itchy trigger fingers, they clicked the sell button without much thought, sending the markets down sharply.
The markets fell from the new highs amid renewed fears of travel and social restrictions as investors fled to safe-havens like gold and treasury notes.
The Dow Jones Industrial Average was down by 2.0%, the S&P 500 Index fell 2.2%, and the Nasdaq was down by 3.5%.
Earlier in the week, President Biden reappointed Jerome Powel as the Fed Chair, and Lael Brainard would be his deputy.
Moving on to Europe
Shares in Europe also fell sharply as new social and travel restrictions were introduced in response to surging infections and the discovery of the new variant.
The Euro Stoxx Index was down by more than 4.00%, and the individual country indices were also down sharply.
Moving further east into India and China
Chinese markets were down marginally as the CSI index was down by 0.6% and the Shanghai Composite index was flat.
Indian equities also fell sharply due to weak global cues, sustained FII's selling, and the new variant threat. The Sensex was down by 4.24%, and the Nifty was down by 4.16%
Earlier in the week, Reliance share prices tumbled RIL, and Saudi Aramco are set to reevaluate the proposed Investment by Aramco in the oil-to-chemical (O2C) business.
There was also positive news as SBI Research upgraded India's GDP growth projection for the year ending 31st March 2022 to 9.3% - 9.6% from its earlier projection of 8.5% - 9.00%.
With the markets reaching new highs every week, a sharp sell-off like Friday was already due. The news of the new strain was just the excuse the bears were waiting for to sell.
However, the fundamentals are still strong enough to warrant a rebound, and a year-end rally is not unlikely.
This correction is probably the opportunity long-term investors were waiting to buy.
Investors can expect more volatility over the next few weeks as more information about the new variant emerges.
A balanced portfolio of stocks, bonds, commodities, real estate, cash, and a tiny amount of Cryptocurrency is the only antidote to mitigate the expected volatility.
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