Week ending 3rd December 2021.

We have had some fairly choppy intra-day moves this week as coronavirus headlines yo-yoed global equity markets.

However, interestingly, we believe that most Omicron scenarios could ultimately result in higher global equity markets!

For example, if as it currently appears, Omicron has milder symptoms and the existing vaccines are effective, then the global recovery should remain on track, which is positive for global equity markets. However, on the flip side, if Omicron turns out to be deadlier and needs new vaccines, then we are likely to see economic contraction and disinflation being countered by fiscal and monetary stimulus, which is also positive for global equity markets.

Unfortunately, the path for global equities is never this simple, smooth or easy – and as we have previously said because equity markets hate uncertainty (and as there is no getting away from the fact that we don’t yet know much about this new variant), financial markets will continue to trade on every news headline.

As such, over the coming weeks until we know more about the Omicron variant, we are very likely to continue to take two steps forward and one step back as equity market volatility is likely to remain elevated.

Additionally, with the reintroduction of restrictions and containment measures, there will undoubtedly be an economic hit – but again, until we know more about the Omicron variant, we don’t know the extent of its economic impact, or if central banks or governments need to intervene with support.

While we fully understand and appreciate that this volatility may be unsettling, long-term investors need not be concerned as ultimately we believe that the path of least resistance for global equity markets remains higher – and please remember that all of the teams at my wealth are here to help you with any portfolio queries or concerns you may have, while our Investment Advisers can provide you with regulated advice, should you need it.

Looking ahead to the coming week, although it is highly likely that coronavirus will continue to dictate equity markets moves, of economic interest to us will be UK GDP for October; UK industrial production; US & Chinese CPI; University of Michigan consumer sentiment index; US & Chinese trade balance.

The Investment Management Team

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