The Final Fear [Video]

Jordi Visser

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Weiss President and CIO, Jordi Visser, regularly produces videos that provide a real-time interpretation of the market's most critical developments.

In a year that saw sharp unwinds due to GameStop, Archegos, a macro slump, and then the Delta variant, Jordi opines that the Omicron variant will hopefully be the year’s final fear, even if the wisdom of the markets suggests that there’s nothing to be feared at all.

 

Jordi begins by pointing to the Goldman Sachs Lockdown Index as evidence that the Omicron variant is more media hype than anything else. Further, he points to the S&P 500 being up 1% in December, as well as hotels, energy, and airlines being amongst the top performers, which suggests that this variant of the virus does not pose the same risks as those before it.

Looking beyond Omicron, the wisdom of the markets suggests that the real story at present is monetary policy tightening and growth fears. With respect to the former, funding markets are building in a more aggressive Fed, credit spreads are widening, and volatility is building in more tightening as well.

With a more assertive Fed voicing the desire to be more proactive about inflation, investors are rightfully reorienting their growth expectations. Jordi believes that Financials and Energy are two attractive areas of the market in the coming regime and he favors value stocks as opposed to growth stocks at present. The caveat is that idiosyncratic stock selection may be more challenging when markets aren’t compounding at historically high rates of return.

Echoing a theme from his last video, Jordi again reiterates that we are on the other side of peak inflation. With that said, his belief is that inflation will settle between 3-4%, which will put pressure on the Fed to be more hawkish. He expects the extent to which the Fed applies the breaks next year will be the biggest story of the next year.

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