Omicron, the Markets, and a Massive Opportunity for the U.S.

A 'variant of concern'... Modifying the current vaccines... Panicking is never a good response... Making Thanksgiving Friday a holiday... Omicron, the markets, and a massive opportunity for the U.S... A vaccine Marshall Plan for the world...

It's time to get acquainted with another letter of the Greek alphabet...

U.S. stock markets on Friday dropped more than 2%, with the Dow Jones Industrial Average suffering its biggest loss of the year. It was a major move during a holiday-shortened trading session that ended at 1 p.m. – during what's normally one of the quietest trading days of the year.

It was anything but relaxed, though, because what drove stock prices down was the emergence of a new coronavirus variant. Dubbed Omicron (the 15th letter of the Greek alphabet), it was labeled a "variant of concern" by the World Health Organization ("WHO").

The WHO's "concern" is that this new variant ‒ first discovered in southern Africa ‒ could be more transmissible, more virulent, and/or less resistant to the vaccine.

The U.S. and other countries wasted little time in announcing travel restrictions on South Africa and other countries in the region. With this iteration of the virus, governments are doing the Wild West equivalent of shooting first and asking questions later... by imposing new controls even before the actual danger is clear.

And so did investors on Friday... They sold rather than wait around.

As I (Kim Iskyan) am writing this, shares are up. But as we continue to learn about the latest chapter of the coronavirus – and what it means for the global economy – we should see what opportunities it might create for the world...

The good thing is that we (mostly) know what to expect...

Admittedly, there's a lot that we don't know about the new variant – in fact, very little is known at this point. Scientists right now are focused on three key aspects of Omicron (pronounced, according to Merriam-Webster, "ah-mih-kron") to assess the true risk: how quickly it spreads, whether it can cause severe symptoms, and if it is able to get around the immunity offered by vaccines.

But this time around, we – as in, scientists, governments, citizens, humankind – have a much better sense of what to expect. While there are a lot of unknowns, at this point we understand the basic contours of the coronavirus... how it spreads, how to fight it, and how to stay safe.

And, encouragingly, vaccine makers Pfizer and Moderna both said that a reformulated vaccine to fight the Omicron variant could be ready within a matter of months... much more promising than the situation in March 2020, when the vaccine issue was a blank slate.

Panicking is never a good response ‒ especially in times like this...

For markets, the Omicron variant could be a brief scare that turns out to be another opportunity to "buy the dip"...

More broadly, depending on its severity, Omicron could be a substantial setback to the ongoing economic recovery... or just a bump in the road. And whichever way that goes could play into the timing of the Federal Reserve's first interest-rate hike. We will likely know all that in the coming weeks.

But in terms of your portfolio... right now, generally speaking, nothing should change. If you've built a portfolio consisting of fundamentally solid, capital-efficient companies that generate strong cash flows and have bulletproof balance sheets, now is the time to hold tight, while keeping an eye on your stop-loss levels... or considering buying more at a lower price.

Emotions and investing don't mix well... and particularly at a time of heightened uncertainty.

Wait – why were markets even open on Friday?

Wouldn't it make sense for markets to close for a four-day weekend, instead of being open for a half day on the Friday after Thanksgiving – this year and every year?

After all, few people are at the office, and most investors are more focused on leftovers than share prices. As C. Scott Garliss of Stansberry NewsWire explained this morning...

Holiday shortened trading days can exacerbate market swings...

With so many money managers and traders out of the office, liquidity tends to be thin. Fewer buyers and sellers on the other side of transactions means stocks will go up or down more than usual.

Of course, there are two sides to every argument... It might make vacation-sense to take the day off, but having two consecutive weekdays of no trading, plus the weekend, could leave a lot of news to digest when markets do reopen on a Monday... And that too could lead to extreme market movements.

So Friday's market drop might have been a pressure valve that prevented a far sharper correction on Monday...

It has only been on very rare occasions, like after the attacks of September 11, 2001, and 2012's Hurricane Sandy – which submerged much of New York City, the geographical heartbeat of U.S. markets – that stock markets have closed for two days (or more) during the workweek... and that's probably not going to change.

Since the start of the pandemic, a number of mutations have evolved in different parts of the world...

A variant reflects a genetic change, or mutation, that makes the virus different from the original sequence... Most recently we have been hit by the Delta variant, which now accounts for nearly all COVID-19 cases in the U.S.

Mutations happen to all viruses, all the time. You get a flu shot every year because each season brings with it new versions of that virus. The danger with COVID-19 – with a mortality rate around 10 times higher than the flu – is that the effectiveness of vaccines may diminish dramatically against a new variant.

Changing gears... the coronavirus represents an enormous opportunity for the U.S...

On June 5, 1947, World War II hero and Secretary of State George Marshall told Americans in a seminal speech to "face up to the vast responsibility which history has clearly placed upon our country."

With utter bleakness spread across post-war Europe – 15 million to 20 million dead – Marshall called on American foreign policy to coalesce "against hunger, poverty, desperation, and chaos"... without regard for country or political doctrine. The subsequent Marshall Plan plowed the present-day equivalent of $145 billion into resurrecting Western Europe through supporting agriculture and industrial production, expanding trade, and reestablishing financial stability.

The Marshall Plan "won the peace" by establishing America as the dominant economic and military superpower ‒ and cemented Western Europe as a critical American ally for decades. It planted the seeds of a resurgent Europe, which would become a big market for American goods. And, most important, it dramatically improved the lives of hundreds of millions of Europeans.

Right now, the setup with the coronavirus is similar...

In the United States – Omicron notwithstanding – the end of the pandemic seems in sight. But in many countries, especially in the developing world, it's not.

Entire economies and societies are in complete disarray... The lives and livelihoods of hundreds of millions of people are at risk... It will take years for many developing countries to achieve pre-coronavirus levels of output.

And a lot of that stems from lower vaccination rates in the developing world... Lower vaccination rates lead to higher rates of infection and death, stifling economic activity.

The gap between rich and poor is staggering. According to NPR, wealthy countries have fully vaccinated about 65% of their populations, yet in low-income nations fewer than 3% of people have been vaccinated.

Getting more vaccine doses in more arms – around the world – is the humane thing to do to save lives... and it also makes compelling economic sense, as the Economist explained in May...

The world cannot rest while people perish for want of a jab costing as little as $4 for a two-dose course. It is hard to think of a better use of resources than vaccination. Economists' central estimate for the direct value of a course is $2,900 – if you include factors like long COVID and the effect of impaired education, the total is much bigger.

Vaccinating the world would be an extraordinarily good investment...

In late May, the International Monetary Fund ("IMF") posited that a program to inoculate 60% of the global population by the first half of next year, including widespread testing and tracing, would cost around $50 billion. By comparison... that is about how much the state of Georgia alone has received in COVID-19 support.

By 2025, the return on that investment – following the calculation published in the Economist – would amount to $9 trillion. That's 266% per year.

Encouragingly, vaccination rates have broadly improved since then. But not everywhere. In the world's low-income nations, there have been just eight vaccine doses administered per 100 people ‒ compared to 148 dosages per 100 people in high-income countries.

And there were probably some sunny projections in the IMF's projections. But let's scale it back and say it would cost three times as much... and deliver only half the forecast economic growth. That's still a return of 134% per year.

The U.S. has done more than any other country to vaccinate the rest of the world, with donations of around 200 million doses as of late October. (China is a distant second.) But there's so much more that could be done... And right now, there's no better investment in humanity than vaccinating as many people as we can.

Vaccinating the rest of the world would also boost America's 'soft power'...

The Marshall Plan was a master stroke of "soft power."

As I wrote in the Digest on October 30, 2020, soft power is the ability of a country to influence countries, companies, and communities by using attraction or persuasion... rather than force or coercion. Soft power is winning hearts and minds through leadership, values, and weapons of mass influence.

Providing assistance to fight COVID-19 is the biggest, fattest soft pitch for America since, well, the Marshall Plan... A global investment in the fight against COVID-19 would demonstrate the best parts of American capitalism and the American character... and is a historic chance for the U.S. to reestablish its role as the leader of the free world.

Such an undertaking would benefit America – in terms of friendship, leverage, positioning – with the governments and the people who it vaccinates. If the post-Marshall Plan relationship between the U.S. and Western Europe is any gauge, it could be the sort of thing that defines generations.

It wouldn't be easy, but it would be worth it...

The U.S. probably couldn't inoculate the world on its own.

But it could try... and it could also get the support of the IMF and the will of the wealthy world to help – and in doing so earn an unheard-of return on investment and improve relationships with key countries in a way that could reap geopolitical and economic benefits for generations – and save millions of lives.

The Marshall Plan wasn't quick or easy. But it was worth it. Vaccinating the world would be too...

New 52-week highs (as of 11/26/21): Telekomunikasi Indonesia (TLK).

In today's mailbag, a few folks share their thoughts on the latest Digest from our colleague Dan Ferris – and one person writes in with general praise during this holiday season. Tell us what's on your mind at feedback@stansberryresearch.com. Remember, we can't provide individual investment advice... But we read every single note that we receive.

"Hello Stansberry, Dan Ferris' observations about the Fed and the future market were spot on. Just as a recent article pointed out that dead people seem to get the best returns on their investments, I think that when politicians get distracted and are unable to make new laws, the economy does so much better.

"But you are right, Dan... you can't predict the future market no more than [you can] predict the ultimate return of Jesus Christ. All we can do is 'gird our loins' and be ready." – Paid-up subscriber Jim K.

"Although I realize that Dan had to have a bit of a 'family show' mentality when he wrote [his latest] Digest, I think 'hogwash' was too mild a term." – Stansberry Alliance member George B.

"Dan, one of your best rants ever – particularly regarding Jerome Powell. Keep it up." – Paid-up subscriber Robert B.

"To all at Stansberry, many thanks for all of the hard work – from behind the scenes to the final product(s). I am one of many who really appreciate your efforts. Happy Thanksgiving – stay awesome!" – Paid-up subscriber Bill T.

Kim Iskyan
Ashton, Maryland
November 29, 2021