The recent market turmoil caused by the emergence of the omicron virus strain may offer investors a chance to position for a trend reversal in reopening and commodity trades, according to JPMorgan Chase & Co.
While it is likely that omicron is more transmissible, early reports suggest it may also be less deadly, which would fit into the pattern of virus evolution observed historically, strategists Marko Kolanovic and Bram Kaplan wrote in a note Wednesday.
This might ultimately be a positive for risk markets because it could signal that the end of the pandemic is in sight, they said.
“Omicron could be a catalyst for steepening (not flattening) the yield curve, rotation from growth to value, selloff in Covid and lockdown beneficiaries and rally in reopening themes,” the strategists said.
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“We view the recent selloff in these segments as an opportunity to buy the dip in cyclicals, commodities and reopening themes, and to position for higher bond yields and steepening,” they added.
The emergence of the new virus strain has roiled markets in recent days, with countries around the world stepping up travel restrictions.