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Markets Within a Couple Percentage Points of All-Time Highs

Markets Within a Couple Percentage Points of All-Time Highs

This story originally appeared on Zacks

So our stock market is back up within a couple percentage points of all-time highs, and the latest wave of Covid-19 outbreak, the Omicron variant, has overtaken any previous wave of the coronavirus pandemic. Are we missing something?

- Zacks

Somehow, the panic-selling that came the day after Thanksgiving and burned through the following week has flamed out. It can’t be because the principles of the yearly Santa Claus Rally are so strong, can it?

In short: no way. The bedrock of the U.S. economy is backstopping market indexes with uncommon strength — business growth, higher employment with better wages and technological advancements into the foreseeable future — and this Omicron strain of Covid is proving to be less dangerous than the previous Delta variant. That it is spreading like wildfire, at record-high levels that are likely under-reported, is not a good development, but the far fewer hospitalizations as a result — especially among the vaccinated population — is.

Thus, airlines, hotels, restaurants and bars can all see through this wave into 2022 somewhat. Economists expect a crimp in Q4/Q1 GDP figures, but which would produce increased demand afterward. Supply-chain constraints, while not a welcome factor, have been addressed successfully and will continue to be, as evident by Q3 earnings reports and forward guidance. This, in turn, may cool the burn of rising inflation in the economy.

Want even better news? There are now reports that the less-dangerous Omicron variant is eclipsing the more-dangerous Delta variant, meaning the most lethal wing of the pandemic is being wiped out. And, while the data is not yet concrete, a flash of relatively benign Omicron infections may give Covid-19 few places to survive, meaning we may be seeing the end of the pandemic overall.

And even if that proves overly positive, vaccinations and anti-viral oral treatments make our current playing field far more manageable than we had been dealing with a year ago. There may even be further strains of the coronavirus emerging, possibly even more ferocious ones, but modern science appears up to the task. Based on recent history, bearishness doesn’t really have much of a seat at the table.

Therefore, here we are: the Dow is now 50 basis points from its all-time high, +5.6% in the month of December. It’s the best performer of the main indexes, though the S&P 500 has posted an impressive +4.8% for the month, and has set fresh closing highs in two of the last three trading sessions. Even the Nasdaq, which has been hit harder than the others this month, is +1.6% in December.

Next week we return to important economic prints, including Jobs Reports, ahead of Q4 earnings season the following week. By the end of January, we will again have heard from the Fed on its attitude toward monetary policy and inflation in the market. As we saw from the pandemic, begun in the country nearly two years ago, there may always be unforeseen challenges, but we look to be entering 2022 well equipped with knowledge and economic development.

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