Investors warn Omicron, Fed is a risk in “growing but slowing” economy

Major indices are set to end the year boosted by the ‘Gathering of Santa Claus’ effect, as the market ignores concerns over the rising number of COVID-19 cases in the United States and the United States. the world.

But according to New Jersey-based financial services firm Hennon & Walsh, the Omicron variant remains one of the main market uncertainties heading into the new year, which investors currently interpret as such.

“The two biggest uncertainties for investors right now are clearly Omicron and what can happen next with regards to COVID-19,” CIO Kevin Mahn told Yahoo Finance Live, “and then, of course, what the Federal Reserve may or may not do so in 2022. “

The Fed is expected to embark on a rate hike campaign next year, just as new coronavirus infections set records in key regions, which could yet prove to be a drag on the economy.

The Omicron variant now includes over 70% of all new COVID-19 cases in the United States. .

Mahn said investors should expect three potential rate hikes to 25 basis points from 2022. Despite the rate hike, however, he believes investment opportunities still exist in what he has. described as a “growing but slowing” environment.

“Historically, financial services have performed well in rising rate environments when economies are expanding,” he explained, adding that the Federal Reserve “would not raise rates if, in fact, the economy was not growing ”.

The Fed voted unanimously on Dec. 15 to double the pace of asset purchases to $ 30 billion per month, ending all asset purchases by March 2022, but warned that “the trajectory the economy continues to depend on the course of the virus. ”

The next FOMC meeting is scheduled for January 25-26.

Whether more Omicron-inspired volatility looms on the horizon remains unclear. But Liz Young, head of SoFi’s investment strategy (SOFI), told Yahoo Finance that the market is serving as a forward-looking barometer, even if the bad news pushes prices forward in the short term.

“I think this is a great time to remind everyone that the market is a leading indicator,” she told Yahoo Finance. “So the market is going to go down, the market is going to bottom out before the bad news peaks. We probably haven’t heard all the bad news yet. We have certainly not reached a peak in the Omicron business.

Thomas Hum is a writer at Yahoo Finance. Follow him on twitter @thomashumTV

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