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Goldman Slams Omicron Panic: “This Mutation Is Unlikely To Be More Malicious; No Reason For Portfolio Changes”

Goldman Slams Omicron Panic: "This Mutation Is Unlikely To Be More Malicious; No Reason For Portfolio Changes"

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This article was originally published by Zero Hedge

Goldman Slams Omicron Panic: “This Mutation Is Unlikely To Be More Malicious; No Reason For Portfolio Changes”

One look at the ridiculous plunge across asset markets on Friday, which sent oil into one of its biggest tailspins in history (which as Goldman calculated would only make sense if the Omicron lockdowns are twice as bad as anything observed so far), and one would think that the Omicron variant – which as Edward Snowden so aptly put it “sounds like the name of an 80s movie’s evil Robot King” (of course, the WHO had no choice but to skip the Xi variant, located right before Omicron in the Greek alphabet for obvious propaganda reasons) – is several times more aggressive and far more deadly than the Delta or any other Covid variant to date. Neither is the case, and in fact, as even Tom Peacock, one of the original Imperial College narrative-setters admitted, “it may turn out to be an odd cluster that is not very transmissable.”

Alas, that would not help politicians who kill a lot of birds with just one brand new and “horrifying” variant, including getting a carte blanche for trillions in new vote-buying stimmies, enforcing even more ruthless and authoritarian government restrictions a dream come true for all liberal fans of big government, and most importantly forcing another round of mail-in ballot elections one year from today. 

And yet, perhaps the pandemic apocalypse is not just around the corner. On one hand, Angelique Coetzee, the chairwoman of the South African Medical Association said today that the new Omicron variant of the Coronavirus results in MILD disease, WITHOUT prominent symptoms.” On the other, none other than the most important bank on Wall Street – Goldman “Vampire Squid” Sachs – which sets the narrative that all other banks dutifully follow, has decided that it’s not worth starting a panic crash over this mutation and in a note published late on Friday writes that “this mutation is unlikely to be more malicious and that the existing vaccines will most likely continue to be effective in preventing hospitalizations and deaths” and as a result, while Goldman “would monitor the situation in Gauteng closely over the next month, we do not think that the new variant is sufficient reason to make major portfolio changes.

Translation: brace for a face-ripping rally come Monday when carbon-based traders finally take over from the idiot algos.

Below are more details from Goldman’s London trader Borislav Vladimirov who penned his “Initial thoughts on risks from the B.1.1.529 variant and market implications.”

Main points

  • While we do not have sufficient information to forecast a global B.1.1.529 wave, a high rate of transmission almost inevitably leads to a variant’s dominance.
  • Nevertheless, the South Africa NICD (link to their Q&A here) note that this mutation is unlikely to be more malicious and that the existing vaccines will most likely continue to be effective in preventing hospitalizations and deaths. The current PCR and antigen tests are expected to continue to identify the mutation.
  • As such, while we would monitor the situation in Gauteng closely over the next month, we do not think that the new variant is sufficient reason to make major portfolio changes.
  • Having said that, given the time of the year and liquidity as well as policy risks in December, investors could consider short term hedges for growth sensitive risky assets.

We would start from what we know:

  • The variant has a large number of mutations
  • It has the P681 H spike protein mutation associated with the higher transmissibility of Delta
  • Currently no unusual symptoms have been reported following infection with the B.1.1.529 variant and as with other variants some individuals are asymptomatic.
  • It is easy to identify and hence monitor – The B.1.1.529 lineage has a deletion (△69-70) within the S gene that allowed for rapid identification of this variant in South Africa and will enable continued monitoring of this lineage irrespective of available sequence data.
  • Most likely current PCR and Antigen test will continue to identify it well.

Potentially high transmissibility has triggered market concern:

  • It is gaining pace rapidly sequencing  90% of new cases just 2 weeks since emergence. For comparison the Delta needed 3 months to reach that intensity. This is the most concerning data point that has attracted market attention.

  • One caveat is that the fast acceleration data could be skewed by location. The virus is spreading in Gauteng which is the largest and most densely populated province of SA. (15.2mio people with population density that is 17.3x higher than the country average)
  • The level of restrictions in SA at the moment (measured by the government stringency index) is low (relative to Israel or Austria for example, see chart below). This can be helping faster spread that isn’t necessarily driven exclusively by the virus characteristics

  • Cases of B.1.1.529 have been identified in Botswana, Israel and Hong Kong. If the variant is highly transmissible, it is most likely that it will eventually spread despite travel restrictions.

What we still do not know…

  • We have no information on the variant’s impact on hospitalizations and mortality. A careful monitoring of the Gauteng data over the next two weeks is essential.
  • There are reports that two of the cases were fully vaccinated. This is a very small sample to make any conclusions and we do not know for how long the patients were vaccinated. What we know from Delta is that antibody levels wear off between 6 and 9 months after the second vaccine and that while the vaccines are less effective in preventing infection, they are still highly effective in preventing hospitalization and death. For the time being there is no reason to believe that this variant will be different in that respect.
  • Will the Pfizer pill be effective against the new mutation?
  • Is the European wave driven by the new variant?
  • While the new variant could be present in Europe, the rapid rise in cases is driven by the Delta variant (see information below)
  • The European data comes with about a month delay from sequencing time so we should know more by the third week of December (unless the process accelerates due to the attention on the new variant)
  • Efforts to limit the current Delta wave in a number of European countries could help preventing the spread of B.1.1.529, if already present.

Is the above a reason to be concerned?

  • A very broad press focus in the past 24h has received high market attention.
  • It will take weeks before we get additional official information and scientific evidence about the potential risks.
  • This comes at a time when investors have been surprised by some of the lockdown measures announced in Europe
  • And also when real growth is likely to fall meaningfully on higher inflation (even though nominal growth is likely to stay well above average)
  • At this time of the year positions in risky assets, especially after strong YTD gains, could be vulnerable to short term corrections (ie 2018 template)
  • Travel restrictions will delay the process of logistics network normalization which would imply that the supply capacity constraints easing anticipated for H2-2022 might take longer to materialize.
  • Meanwhile, monetary policy has recently shifted gears to signal faster removal of accommodation which could add to a short-term risk aversion into the December FOMC.  

Conclusion: while we do not have sufficient information to forecast a global B.1.1.529 wave, a high rate of transmission almost inevitably leads to a variant dominance. Nevertheless, we can have reasonable degree of confidence that this mutation is unlikely to be more malicious and that the existing vaccines will most likely continue to be effective in preventing hospitalizations and deaths. As such, while we would monitor the situation in Gauteng closely over the next month, we do not think that the new variant is sufficient reason to make major portfolio changes. 

Tyler Durden
Sat, 11/27/2021 – 16:59





Author: Tyler Durden

Economics

5 Reasons ‘Cathie Wood Stocks’ Could Double in 2022

Many of you are familiar with Cathie Wood, the famed stock-picker and founder of ARK Invest who focuses on investing in disruptive tech stocks with enormous…

Many of you are familiar with Cathie Wood, the famed stock-picker and founder of ARK Invest who focuses on investing in disruptive tech stocks with enormous upside potential. Indeed, she’s so famous that the stocks she buys in her funds are often labeled as “Cathie Wood stocks” — stocks like Tesla (NASDAQ:TSLA), Coinbase (NASDAQ:COIN), Teladoc (NYSE:TDOC), Square (NYSE:SQ) and Roku (NASDAQ:ROKU).

An illustration of an astronaut on a cloud looking at a framed photograph of Cathie Wood.Source: Catalyst Labs / Shutterstock

You might also be familiar with how those Cathie Wood stocks have gone from Wall Street’s biggest winners to its biggest losers over the past few years.

During the pandemic, her stocks absolutely soared on the backs of consumers embracing disruptive new technologies and the Fed providing a wall of liquidity to incentivize risk-taking behavior in markets. Cathie’s signature fund, the ARK Innovation ETF (NYSEARCA:ARKK), skyrocketed an amazing 157% higher in 2020.

It was an absolutely jaw-dropping performance.

But stocks don’t go up forever. And, in 2021, Cathie Wood stocks stopped going up as consumers decreased usage of new technology platforms last year and red-hot inflation threatened valuations. By the end of the year, the ARK Innovation exchange-traded fund (ETF) — the same ETF that rose 157% in 2020 — dropped 24% in 2021.

It was an enormous reversal.

And now my team and I think that so-called Cathie Wood stocks are due for another, even-bigger reversal in 2022 because the thing about stocks is that while they don’t go up forever, they also don’t go down forever — and Cathie Wood stocks have fallen too far, too fast to oversold and undervalued levels with some major turnaround catalysts on the horizon.

2022 Rebound

Our thinking here breaks down into five components:

  • The economy will slow in 2022. Driven by plunging consumer confidence, a sharp drop in the household savings rate, rising interest rates driving up borrowing costs and the end of stimulus payments, consumer spending will fall flat in 2022. Consumer spending drives 70% of the U.S. economy. A consumer spending slowdown will naturally produce an economic slowdown, the likes of which will make healthy corporate earnings growth relatively scarce in the market. Investors will re-concentrate their investment dollars into companies that can continue to produce strong growth — i.e. Cathie Wood stocks. Growth stocks will rise. Value stocks will struggle.
  • Inflation is going to meaningfully decelerate this year. Inflation was the bane of Cathie Wood stocks in 2021. But inflation rates will dramatically cool in 2022 as consumer spending slows, supply chain bottlenecks improve and the year-over-year comps get much harder. Throughout the year, inflation rates will fall from 7% to 5% to 3% and will likely end 2022 around 2%. Accelerating inflation killed Cathie Wood stocks in 2021. Decelerating inflation will boost Cathie Wood stocks in 2022.
  • The Fed will be forced to take a dovish pivot by the summer. This is a data-driven Fed that has a history of only being hawkish when it is absolutely required. A hawkish policy stance will not be required by the summer. Inflation will be decelerating rapidly. Economic expansion will be slowing. And the labor market will likely continue to struggle with shortage concerns. In the face of that data, the Fed will revert to a dovish policy stance — which, of course, will be a bullish development for growth stocks.
  • Consumer usage of technology platforms will reaccelerate throughout the year. Consumers didn’t stop using tech platforms in abundance in 2021 because those platforms weren’t useful. They were just sick and tired of using nothing but those platforms for a full year in 2020. But we are now about a year into the economic reopening, and all those pent-up consumer demands have been exhausted. We fully expect consumer behavior to normalize in 2022. And in this day and age, “normal” means accelerated adoption of tech platforms. Such accelerated adoption will help tech companies re-accelerate their growth trajectories in 2022, especially as the year-over-year comps get easier.
  • Hypergrowth tech stocks are very cheap relative to long-term estimates. And many Cathie Wood stocks get a bad rap for being very expensive. But they’re only expensive if you look at 2022 estimates. If you look at 2025-plus estimates, the story becomes much different. Square is trading at just 1.6X its 2025 sales estimates, while Spotify (NYSE:SPOT) is trading at 2X its 2025 sales estimates. Roku is at 3.4X 2025 sales estimates. Zoom (NYSE:ZM) and DocuSign (NYSE:DOCU) are both around 6X. For comparison, McDonald’s (NYSE:MCD) is trading at 6.6X its 2025 sales estimates, and Coca-Cola (NYSE:KO) is trading at 5.4X 2025 sales estimates. So in other words, hypergrowth tech stocks have corrected low enough that, based on 2025 estimates, many feature equivalent valuations as blue-chip, zero-growth stocks. That makes no sense — and provides compelling rationale for a move higher in tech stocks.
  • Overall then, we believe that while Cathie Wood stocks were crushed in 2021 and have continued to sell off in 2022, they’re going to rebound enormously over the next 12 months.

    We’re not alone in that thinking…

    Take a look at the consensus 12-month-forward analyst price targets for some of the top Cathie Wood stocks. Coinbase — 91% upside potential. Square — 105% upside potential. Roku — 107% upside potential. Zoom — 78% upside potential. Teladoc — 98% upside potential. UiPath (NYSE:PATH) — 82% upside potential.

    The folks who run the numbers on these stocks think they’re way undervalued. We’ve run the numbers on them too — and we agree.

    Mark our words. 2022 will be a huge rebound year for hypergrowth tech stocks.

    To find out which stocks you should be buying right now for triple-digit returns over the next 12 months, click here.

    On the date of publication, Luke Lango did not have (either directly or indirectly) any positions in the securities mentioned in this article.

    The post 5 Reasons ‘Cathie Wood Stocks’ Could Double in 2022 appeared first on InvestorPlace.





    Author: Luke Lango

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    Economics

    CVAC Stock Alert: Why Is Vaccine Maker CureVac Plunging Today?

    It’s been a rather dismal end to the week today. Indeed, many top tech stocks have been hit hard amid various economic concerns. One of the bigger losers…

    It’s been a rather dismal end to the week today. Indeed, many top tech stocks have been hit hard amid various economic concerns. One of the bigger losers today is CureVac (NASDAQ:CVAC), with CVAC stock currently down approximately 13% in late afternoon trading.

    The logo for CureVac (CVAC) is displayed on a smartphone screen over a yellow background.Source: rafapress / Shutterstock.com

    This move comes amid broadly bearish market sentiment today. Stocks are feeling the effects of what appears to be an overly hawkish monetary policy environment on the horizon. Bond yields have surged ahead of expectations the Federal Reserve will hike interest rates. Inflation concerns and supply chain issues continue to hit the economy hard, spurred by continued concern over the coronavirus pandemic.

    For stocks like CureVac, one might think this macro environment may be a positive. After all, this is a company with an experimental Covid-19 vaccine. Vaccine stocks have been big winners in recent years, with CureVac’s vaccination hopes having been a driver for this stock in the past.

    However, today, this narrative isn’t playing out. Let’s dive into what’s driving CureVac lower today.

    Analyst Downgrade and Bearish Outlook Sinking CVAC Stock

    Today, it appears a key Bank of America (NYSE:BAC) downgrade for CVAC stock is spooking investors. Analysts Geoff Meacham et al. have put forward a relatively dim outlook for the German biotech stock. The downgrade was to underperform from neutral, suggesting downside of more than 8% from yesterday’s close.

    Today, CVAC stock has since moved below these analysts’ target range. It appears that CureVac’s decision to pull its European marketing application and instead focus on an mRNA vaccine is something the analysts don’t like. Additionally, analysts point out that the market opportunity is shrinking. Existing vaccine players currently dominate the market, making it harder for new entrants to grab market share.

    Where CVAC stock ultimately goes from here remains to be seen. However, the market appears to be sharing analysts’ views on this stock today. Accordingly, it appears likely that volatility will continue for some time for this biotech stock from here.

    On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

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    Author: Chris MacDonald

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    Economics

    Confidence Shakedown In Zillow Stock Will Send Bears Into Hibernation

    The U.S. economy has never been hotter but Wall Street investors are on edge. As a result, great stocks are collapsing from their pandemic highs. One of…

    The U.S. economy has never been hotter but Wall Street investors are on edge. As a result, great stocks are collapsing from their pandemic highs. One of those is Zillow (NASDAQ:ZG) stock, which is now 75% below its peak from last February. ZG stock’s 1000% moonshot out of the 2020 lockdowns was absolute lunacy.

    ZG stock: the zillow app on a screenSource: OpturaDesign / Shutterstock.com

    Investors went nuts chasing online businesses benefiting from the pandemic. While there is truth that Zillow’s business stood to gain from the trend, the bulls went beyond reason.

    Most stock corrections happen over bad expectations. In this case the correction was also partly because the company also committed a faux pas. Zillow’s management delivered bad news last year regarding a strategic shift. They exited the business of buying homes at a loss and that shook investor confidence.

    The stock consequently fell sharply from near $100 per share and hasn’t stabilized since. Therein lies the technical opportunity.

    ZG stock is falling back to the levels it was at before the pandemic. This puts the current price in a pivotal area, where buyers usually lurk. There’s no evidence that this will be an absolute flat line bottom, of course. Stabilization usually happens as a stock stops making lower-lows.

    Signs of ZG Stock Seller Exhaustion

    Zillow Group (ZG) Stock Chart Showing Potential Pandemic BaseSource: Charts by TradingView

    Yesterday the stock market ended in disaster and the carnage only continued afterhours. In spite of it all ZG stock closed positive, which could be a sign of seller exhaustion.

    The bears are going back into hibernation. Those who are still holding shares here are less likely to panic out now. Also new buyers from these levels will have stronger conviction than ones who bought extreme highs.

    In other words, when a stock falls 70%, it shakes out all the weak hands. Now the owners are less jittery, which usually translates into stronger support.

    I can’t argue for an immediate rally, nor am I expecting ZG stock to revisit $200 per share. The 2021 highs were overblown, so the truth lies somewhere in the middle. I would consider Zillow Group a long-term investment with a potential shorter term swing. But by no means should investors go all in expecting a “V” recovery to the highs anytime soon.

    Wall Street lost its mind after the pandemic. I doubt that those days are coming back and I’m grateful. I like it better when we do fundamentals homework, consult a few charts and set trades with conviction. Now price action is more reliant on headlines from the Fed, politicians or other world leaders than investor sentiment.

    Fundamental Are Strong

    The best argument for ZG stock is its P&L, and that metric speaks volumes. The business is growing at a rapid pace despite the hiccups; revenues now are five times higher than 2017 and gross profit has nearly doubled.

    Moreover, thanks to the sharp stock drop, the valuation still makes sense. Even though Zillow loses money, its price-to-sales is under three. This means that buyers of the stock now have modest expectations. You can’t disappoint a low bar.

    This is all to say that I am more optimistic than pessimistic on ZG stock from here. The elephant in the room is of course the effect of the Fed monetary policy. They are in the process of putting the crimps on the economy. This could cause the mortgage industry to slow down. As a result, the Zillow business could suffer a bit. This is another reason for fans of ZG to temper their enthusiasm a bit.

    This morning the indices are again under pressure and technically broken. Onus is on the bulls on Wall Street to pick the reins back up.

    On the date of publication, Nicolas Chahine did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

    Nicolas Chahine is the managing director of SellSpreads.com.

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    Author: Nicolas Chahine

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