Omicron Lands In The U.S., Implications For The USD And S&P 500

It’s just been reported that the first case of the Omicron Covid variant has been found in California. This would mark the first such case in the U.S. since news of the variant began to spread last week.

That initial headline evoked a strong response from markets, at least initially, but calm showed around this week’s open as many risk markets began to show a greater sense of stability.

But, now that the variant has been confirmed in the United States, the bigger question is ‘what’s next?’


It’s a heavily mutated Covid variant that, as of now, carries a litany of unknown consequences. One of the few things that is known at this point is that it’s more transmissible. But, the more important questions of whether current vaccine protocol is effective or whether this variant amounts to more hospitalizations or more cases of ‘Long Covid’ that remain to be seen, and likely we won’t have much data on that for another couple of weeks.

Outside of waiting for more consistent data, markets have been running on anecdotes, such as the Moderna CEO Stephane Bancel saying that existing vaccines may not be as effective against the variant. But, on the other side, just a day earlier, the Pfizer CEO Albert Bourla had said that the Covid pill that his company is working on would be effective against the variant. So there’s just a ton of unknown out there at this point and, in general, markets abhor uncertainty, which explains last week’s Black Friday drop.


Given that we’ve already had an episode of this getting ‘priced-in,’ there are a number of possible scenarios that have already popped up.

In the immediate aftermath of this news, Gold prices popped higher, the US Dollar dropped and stocks started to sell-off. That sell-off on Friday was especially brutal with equities closing near their lows – but this was a holiday-thin liquidity environment that I had warned of ahead of the holiday.

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