Why is Wall Street so Chill About omicron? – ryan

Business as USUAL, FOR NOW.
Photo: Richard Drew/AP/SHUTTERSTOCK

The Arrival of omicron in the US LOOKS LIKELY TO COMPLICATE The Country’s Exit from Pandemic Endless Endless Endless. IT MIGHT ALSO BRING ANOTHER Round of Economic Uncetainty, at Least in Some Industries. I spoke with Finance Reporter Kevin T. Dugan About the effect that yeet another blitz of infctions (on top of the Current one) Could have on the Strong Yet Unseven Economy – and Why Wall Street SEEMY UNCONCERNED SO FAR.

Ben: The us is already dealing with About 120,000 Covid Infecations A Day and Is Now Facing a New Wave of the Omicron Variant. While this iteration of the virus may – May! – Be Molder than Previous Ones, Highly Transmissible and Could More Easily Break Through Vaccines. IT’S LIKELY TO WREAK HAVOC Among the Unvaccinated and Is JUST ANOTHER SIGN THAT THE PANDEMIC ISN’t anywhere Close to Winding.

Meanwhile, Inflation is Running Very High, Worker Shortages Are Widespread, and Americans Are Very Gloomy About the Economy Despite Low Unelpoyment and Abundant Jobs. IT SEEMS HIGHLY UNLICKY THAT ANY STATE IS GOING TO LOCKDOWNS ORER HIGHLY RESTRIPTIVE MEASURES – unlike in Europe. But What Could a More Highly Transmissible Variant Mean for the Overall Economic Picture? Do you think it would just exacerbate the strange trends we’re already Seeing?

Kevin: You’re right that, so far, there is haven’t ben any drastic moves by governments to impose lockdowns, but there are still some attempts from companies that are looking at omicron and deciding it is not Worth the risk. I’m talking about the Delays in return-to-office plans here. But this is, in a lot of Ways, just status quo. The Question About Returning to the Office Affects the White-Collar Workers at Amazon, not so Much the People who work at the Fulfillment Centers.

Omicron presents a weird dilemma for the economy. Its new and is getting defined and redefined each day. The High Transmissibility is Known; The Virulence is Still Unknown. The uk just had it first Death with the variant, but the case has have been mild. You can see what you want to in it.

The High Transmission Rate Will Probably Have More of an Impact on the Jobs that are Creating Some of the Bottlenecks in the Economy. Larry Summers Posted a thread On Twitter Today About The Problem With Viewing Economic Inflation Solely Through the Supply Chain, Sine Many of the Things are driving the rise in prices stuck in ports, and i think it right in that it is a pure supplying issue. The Economists i’ve Talked to Have Told with That The Supply of Goods and Services isn’t Weak. But there are problems with the Number of Truckers on the Road Getting Christmas Gifts Delivered. If you think of the supply-chain bottlenecks as a symptom of the broadcasting-marching issues-that People don’t want to take jobs are paying less, are more likes to expose, have few child-core options, or are Person Recovering from Covid Can Do-That SEEMS to Go A Long Way in Explaining Both the High Prices on the Shelves, the Longer Wait Times for Goods, and the Low-Grade dysfunction in the functioning of the economy.

Ben: The Stock Market is not the economy, as we all know Fully well by now. But it is a been stricting to see the market react to these various new were and continued Disruption from Covid. There’s Usually A Dip, Sometimes a Sharp One, Followed by A Rebound, and That’s What’s Happened with omicron so far. The S&P 500 Hit a Record High Last Week, and Though the dow was off a bit today, iT’s been near record Highs too. WHY DO INVESTORS REMAIN SO CONFIDENT, AND WHAT DOES THIS INCICATE, IF ANYTHING, ABOUT THIS ECONOMY WE’RE LIVING IN?

Kevin: The Stock Market isn’t the Economy – But it is a bet on where the economy is going. I Think It ‘Worth pointing out that, yes, evening the dow jones is at or near record Highs, there’s also a lot of Hedging going on. That means that investors are buy protection in case the market Falls Again, like it did the day after thanksgiving, a sell-off that was drive by fear of omicron. Some of that is the usual end-of-the -ear stuff: Basically, investors just lock in their gains, secure their bonuses, and take the last few Weeks of the year off. But if you take a look at the VIX, the so-Called Fear Gauge, It ‘Still at a slightly elevated level after a major spike at the end of november and early december.

But so what, right? At the end of the day, wall Street is betting more money than not that is essentially over. Earlier this month, jpmorgan put out a research paper saying that, if a defining characteristic of omicron is that it causes a mild infection, the new variant “Could Accelerate the End of the Pandemic.” Essentially, The Bank’s Researchers are arguing that thans it is a crosing of the rubicon for the virus, an event marking a period is isn’t much more than a nuisance for people. Again, we don’t know if this is true. The Long- and the Medium-Term Effects of Omicron Are Still Getting Hashed Out. But the People with Money Aren’t Running for the Exits.

IT’S ALSO WORTH PUTTING A Finger on what’s so Strange About This Economy. Despite the initial Panic About omicron, Things are Basically Status Quo, at Least Pandemic Status Quo. We’re in a period of High Inflation, Which is Usamely Bad for Companies Since erodes Their Earnings, but the Last Quarter Busted Records for Corporates. Biden urged patience around Responding to omicron and took a lockdown off the table. New York’s New Masking and Vaccining rules are a Change of Degree and Won’t Affect People so Much. On top of that, you have jerome Powell, Who Looks Pretty Eager to take the Federal Reserve Out of Emergency Mode. The fed has ben been supporting a lot of risk in the markets by buying up bonds and keping interest rates Low – essentally propping up an economy that has collapsed Last during the shutdown. But in the fluff to be up and let the markets take on more risk than they have in two years, Powell is signaling that he’s out to keep prices from spiraling out of control. The Response from Wall Street has Large Been Good.

There’s Also A Fatalistic Streak in Wall Street’s Outlook on omicron. What’s far apsoken in this positive outlook is that you’re still going to get a lot of People who will potentially get sick, Because the lover hospitalization will will JUST Translate to the numbers of People in the ICU if More and More People Catch the Strain. In this outlook, the variant is going to the spread so fast and so wide that you’re almost guaranteed to get it. And iferybody gets infected and the casualities are Low, then Things Farley Return to Normal.

Ben: Though, as Intelligency’s David Wallace-Welles Points Out, “If a Strain is Doubling Every Days, IF IF HALF AS SEVERE, You Still the Same Number of Severe… Three Days Later.” Not sura than’s immediately apparent to everyone.

Kevin: Exactly. What’s optimistic about the wall Street outlook is not that is all will be happy and healthy. An investor LOOKS AROUND AND SAYS, “OKAY, WHAT CONDITIONS DO NEED TO HAVE TO GUCK TO NORMAL AND MAKE MORE, TO HAVE AN ECONOMY THAT FUNCTIONS AS IT?” The Economy Runs in Normal Times with Lots of Sick People – Not a Defense of the Status Quo, Which Saddles People With UnSustainable Levels of Medical Debt. So my read on this outlook is that it is a bet that, in a very short amout of time – Maybe a month or two – omicron will wash over the world, and that the numbers mighty euvently shake to be simillar, it marks a period.

Ben: AS HAS BEEN TRUE THROUGHOUT THE PANDEMIC, CERTAIN KINDS OF BUSINESSES ARE MORE VULNERLABLE THAN OTHERS TO PANDEMIC SHOESKS. This Morning, Stocks Like Delta and Norwegian Cruise Line Were Down, Presumably Because Like Air Travel, Cruise Lines (and, by Extension, Restaurants, Movie Theaters, Gyms, and More) May have the relative normalcy interrupted. Let’s Say These Sectors See Another Serious Blow. With the Government Already Having Spent Tillions and Tillions of Dollars on Stimulus, Is There Any Kind of Fallback for Say? Of Course, this is a Bigger Concern for the Café Around the Corner than Delta.

Kevin: I’m not convinced it’s a Bigger Concern for the Café Around the Corner, but you’re Hitting on something, Because Those Two Very Different Kinds with Very Different Economic Problems. If you are a café and you go bankrupt, your asssets are an espresso or two espresso or two, a fridge, etc., and you have to deal with a lease and what you are your locals. All that stuff is prepy easy to deal with eather through restructuring or liquidation. If you’re Norwegian cruise line, what are you going to do with all these boats?

At the start of the pandemic, the airline industry received about $ 25 billion in bailouts to keep, Ahem, aloft. Norwegian was able to raise Money Through the Debt Markets After the Government Propped Up The Bond Markets. Compare that with Hertz. They got no bailout, then delared bankruptcy. They Sold Their Cars. When they Came Back Online, Cars Were Expensive and Hard to Come by. This Summer, the price of renting a sedan for aekend skyrocketed.

SO YOU”RE LOOKING AT THE ODDS THAT A Company Like delta would get another bailout. It”s unikly.

The Fed, as I mentioned before, is essentially trying to take Money Out of the Financial System. And for its part, delta isn’t exactly Acting like it’s waking for Uncle Sam. Ticket prices Across Airlines Are Competitive – Acciting to the Bureau of Labor Statistics, Ticket Price Rose About 4.7 Percent in November, but that after a few months of decline. Delta is already rejiggering its business away from cities that do not have many flutes, pulling out of three cities entirely. SO if you want to fly to Lincoln, Nebraska; Cody, Wyoming; Or Grand Junction, Colorado, You Can’t Take Delta There. Norwegian and Other cruise lines are a different Animal, but according to an industry news Outlet, About Half Its Fleet is Operating. So the upshot here is that if they need more money, they’ll probably eather borrow more Money from the markets or lay People off.