Global investors look to Omicron for direction

Investors are closely watching the latest news on the rapidly spreading Omicron variant for signs of how much the virus could impact the US economy and earnings as the market heads into what has historically been a strong time of year for equities. Overall, the S&P 500 is slightly ahead since November 24, prior to news of the variant hitting markets.

It marked a record-high close on Thursday, as encouraging developments gave investors more ease about the economic impact of the variant. "The market is extremely reactionary now and every little bit of news has a huge impact," said George Young, a portfolio manager at Villere and Company. Young is planning on taking advantage of any Omicron-induced volatility to add to stocks that rely on tourism and travel such as bank company First Hawaiian. Shares of the company are up 14.4% for the year to date. The Omicron variant is causing infections to double in 1.5 to 3 days, according to the World Health Organisation. The variant now accounts for 73% of all new US cases, up from less than 1% at the beginning of the month. Still, questions about Omicron's virulence have made investors less pessimistic than the original reaction.

The S&P 500 closed down 2.3% on November 26 after the variant was discovered, on fears of fresh economic lockdowns. A South African study offered hope about the severity of Omicron and the trend of Covid-19 infections on Wednesday. Shares of vaccine makers slumped in December as investors expect the Omicron variant's impact to be limited based on recent data. That bodes well for what is known in the market as a Santa Claus rally. Historically, US stocks have risen during the last five trading days of December and the first two days of January in 56 out of 75 years since 1945, according to data from CFRA Research. This year, the time period starts on December 27. The average Santa Claus rally has boosted the S&P 500 by 1.3% since 1969, according to the Stock Trader's Almanac