BCA Weekly Commentary 12/24/21: Omicron Variant Panic or Opportunity
ECONOMIC IMPACT. Variability on economic growth assumptions for next year continue to hinge on Federal Reserve policy direction which has been fairly well defined. Speculation continues on Omicron and its impact on growth. In short term it may thwart growth, however, in time, it may prove to reduce risk to economic growth in 2022. From our own personal experience and research there exists much over hype concern on the severity of the new variant. However, despite elevated cases in short term symptom's remain MILD. The ramifications of which will serve to accelerate natural immunity which in term in 2022 may then REDUCE the threat to Covid-19 and thus overall cases. In countries such as Brazil & India vs USA & EU cases have been falling tied to lower vaccinations and broader use of therapeutics to treat Covid-19 leading to broader natural immunity. Despite the reliance & mandates of vaccinations especially in USA, the Omicron variant's rise in infects may then serve to accelerate natural immunity tied to its higher transmission and milder symptoms. Factoring this in for 2022 we still assume growth deceleration in 2022, but that growth may be more visible.
INVESTMENT IMPACT. The implications of the above are profound especially to the overall economy and to Healthcare which is suffering from staffing shortages, reduction in elective surgeries and higher hospital utilizations. The combination of slower growth & inflation, the elimination of the Build Back Bill in Congress which may effect drug prices and waning Covid-19 cases may prove to lift the cloud overhanging many smaller cap health care names which our models contain. Time will tell.
Our model portfolio performance has been updated on our website as of 10/29/21.
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