Encouraging news on Omicron … consumer confidence bounces back … GDP edges higher … and a bullish tech tailwind
Before we dive into today’s Digest, a quick scheduling note…
Our Customer Service team will be taking off tomorrow the 24th through the 27th. If you have any issues that require their help, they will be glad to assist you when our offices reopen next Tuesday.
As for the Digest, we’ll be taking off tomorrow and Christmas Day. But we’ll return on the 26th with a special “technology” series from Luke Lango’s Early Stage Investor service.
From all of us at InvestorPlace, a Merry Christmas and Happy Holidays to you and yours!
***In yesterday’s Digest, we highlighted the media’s tendency to focus on the negative
In light of that, today, let’s spread a little Christmas cheer with a “good news” Digest.
Of course, if yesterday’s statistics are accurate, there will be a 66% decline in today’s readership because people prefer reading negative news. We’re going to ignore that because today’s Digest isn’t for the Scrooges. Bring on the Tiny Tim’s.
Let’s begin with Omicron.
Yesterday, Bloomberg reported that Omicron has 80% lower risk of hospitalization. The data come from South Africa, where the Omicron variant first hit.
From Bloomberg:
South Africans contracting Covid-19 in the current fourth wave of infections are 80% less likely to be hospitalized if they catch the omicron variant, compared with other strains, according to a study released by the National Institute for Communicable Diseases…
Compared to delta infections in South Africa between April and November, omicron infections are associated with a 70% lower risk of severe disease, they said. The omicron data was collected for the two months through November.
No one wants Omicron, Delta, or any version of Covid-19. However, the global case count and transmission data we have suggest we won’t be able to fully eradicate this disease. The latest data suggest that even fully vaccinated and boosted individuals can become infected and spread the Omicron variant of Covid-19.
If we accept that, then Omicron’s new status as the dominant global strain of Covid-19 is a positive given the statistics just referenced. After all, if we can’t kill this virus, then having a strain that causes drastically fewer hospitalizations is a good thing.
***Last week, we highlighted research from our macro specialist, Eric Fry, making this point
From Eric:
(Professor Karl Lauterbach, a clinical epidemiologist who is in the running to be Germany’s next health minister), theorizes that Omicron may be a variant that is “optimized to infect,” but is less lethal than Delta.
Therefore, if Omicron “conquers” Delta to become the dominant worldwide strain, it could help end the pandemic entirely.
As we noted in that Digest, it wouldn’t be the first time a milder viral strain turned into a societal positive. This “antigen drift,” as it’s called, helped end the Spanish Flu.
Eric points toward History.com, which explains how slightly altered versions of the Spanish Flu kept popping up in successive winters. But they became far less deadly, and eventually were indistinguishable from the seasonal flu.
If we’re seeing this play out with Omicron, it will help accelerate the rebound of the global economy. Lauterbach says it would be an “early Christmas gift.”
This isn’t the only positive news on the Omicron front…
Yesterday, U.S. health officials authorized Pfizer’s Covid-19 pill. It’s the first antiviral drug to fight the infection to get such an approval. It’s found to reduce hospitalizations and deaths by a whopping 89%!
And just this morning, we learned the FDA has approved Merck’s antiviral pill to treat emergency Covid-19 cases. It can be taken at home, without requiring an IV or injection.
Fantastic news.
***Meanwhile, in other good news, U.S. consumer confidence is up in December
Yesterday, we learned that the index of consumer confidence rose to 115.8 in December. That’s up from the forecast of 111.
From MarketWatch:
Confidence is clearly down from its peak of 128.9 in June but it has shown some resilience in light of higher inflation and continued spread of COVID-19.
While jobs are plentiful, higher prices for food and energy have become a concern for households at the lower end of the income scale.
And this comes from Lynn Franco, senior director of economic indicators at The Conference Board:
Expectations about short-term growth prospects improved, setting the stage for continued growth in early 2022. The proportion of consumers planning to purchase homes, automobiles, major appliances, and vacations over the next six months all increased.
And this morning, we learned the University of Michigan’s consumer sentiment gauge is slightly up.
It climbed to 70.6 for December’s final reading, up from 70.4 earlier this month, and nicely up from November’s 67.4.
The 0.2 bump isn’t tons, buy hey, we’re focusing on the positive!
As we’ve pointed out here in the Digest, consumer spending makes up about 70% of the U.S. GPD. So, if consumers are feeling good and planning on opening their wallets in 2022, it points toward healthy corporate bottom lines that help buoy stock prices.
By the way, yesterday, the Commerce Department reported that the U.S. economy grew at an annual rate of 2.3% in the third quarter. That’s up from the estimate of 2.1%.
***Meanwhile, Omicron doesn’t appear to be denting the airline recovery
From Barron’s:
…there appear to be no signs yet of the new variant significantly affecting air travel in the U.S. in the run up to Christmas.
More than two million people passed through airport security checkpoints on Monday for the fifth consecutive day, according to Transportation Security Administration data.
The numbers have been tracking at between 81% and 85% of traveler throughput against the same days in 2019, although the peak holiday travel days are ahead.
For comparison, the busiest day over the Thanksgiving holiday—Nov. 28—reached 85% of 2019 levels. Word of the new variant surfaced only a couple of days before that heavy travel day, sinking the stock market. On Nov. 24, the day before Thanksgiving, the rate was 88%.
I’ll add that when Delta reported earnings last week, it raised its fourth-quarter guidance. It noted that demand remains “particularly strong” during this holiday season.
Slowly but surely, the airline sector is clawing back.
***Finally, though we’re having a little fun with this one, Elon Musk is done selling Tesla shares (or at least, close to being done)
From MarketWatch yesterday:
Elon Musk said Tuesday he’s met his goal of selling 10% of his stake in Tesla…
Musk also tweeted Sunday night that he will pay more than $11 billion in taxes this year. That equates to about 8.06 million of his recently sold shares going to his tax bill on stock options set to expire next year.
We’re not certain he’s done selling, but if he isn’t, he’s close.
From Barron’s this morning:
Tesla CEO Elon Musk sold more stock as part of a prearranged plan to exercise expiring management stock options. He said he’s just about done selling…
Over the past couple of days, Musk sold another 1.9 million shares. Sales on Tuesday and Wednesday bring the total number of Tesla (ticker: TSLA) shares sold to roughly 14.8 million.
On both days—once on a podcast and also on Twitter— Musk said he was just about done selling. He has another 4 million or so expiring stock options he needs to exercise.
Now, even though we’re having a laugh with this one, it’s not insignificant.
It was back on November 7th (a Sunday) that Musk polled his Twitter followers, asking about selling, resulting in his decision to sell shares.
Starting the following day, Monday 11/8, extending through earlier this week, here’s what happened to Tesla’s stock in response…
Down 27%! Ouch!
But since word broke earlier this week that Musk is wrapping up the selling, Tesla has surged 16% as of late-morning Thursday.
***So, why is this positive news for anyone who isn’t a Tesla investor?
Because Tesla commands the 5th heaviest weighting of all stocks in the S&P 500 and the 6th heaviest weighting in the Nasdaq 100. This means it has a significant impact on the overall market.
Beyond that, think of all the ETFs and managed funds that hold Tesla as a major weighting.
Their prices have suffered collateral damage thanks to Musk’s selling spree.
Given this, let’s not minimize the impact of Tesla falling 27% over roughly the last six weeks. It’s had significant market ripple effects. But that downward pressure is now removed. That calls for a little eggnog in my book.
It’s not all bad news out there. And we look forward to bringing you more of the good news in 2022.
Have a good evening,
Jeff Remsburg
