JPMorgan's stock guru says buy the omicron dip, keep betting on reopening

Published Thu, Dec 2 20219:28 AM EST

Wall Street's top strategist Marko Kolanovic believes the new omicron variant of the coronavirus could ultimately prove to be bullish for risk assets as it could speed up the end of the pandemic. The strategist is advising clients to buy the dip in stocks, especially economically sensitive names tied to the reopening. "If a less severe and more transmissible virus quickly crowds out more severe variants, could the Omicron variant be a catalyst to transform a deadly pandemic into something more similar to seasonal flu? That development would fit with historical patterns of previous respiratory virus pandemics," Kolanovic said in a Dec. 1 note. "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," he added. The stock market has had a roller-coaster ride over the past few days as investors monitored the situation with the omicron variant. The major averages reversed sharply lower on Wednesday after news that the first U.S. omicron case had been reported in California . Travel-related stocks have been hit the hardest on fears that the new strain could lead to stricter travel requirements. Last Friday, the Dow Jones Industrial Average lost 905 points for its worst day since October 2020 in the holiday-shortened session after the World Health Organization labeled the omicron strain a " variant of concern ." Kolanovic said the initial sell-off happened on "one of the lowest points of market liquidity for the whole year, prompting a crash in various assets sensitive to global growth and recovery such as oil." JPMorgan's Kolanovic was promoted to chief global markets strategist from the bank's head of macro quantitative and derivatives strategy in 2021. He was one of the few on Wall Street who correctly called the March 2020 bottom and the subsequent rebound. Kolanovic has a Ph.D. in theoretical physics, and he's famous for using alternative and quantitative data to predict the stock market's ups and downs. The strategist said data on omicron is still sparse and information has been contradictory, but early data suggests that the variant could be less severe even though it's more transmissible. "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," Kolanovic said. Investor Bill Ackman had a similar call earlier this week, saying that the omicron variant could actually give U.S. stocks a boost if symptoms turn out to be less severe.

A trader works on the floor of the New York Stock Exchange (NYSE) in New York City, November 29, 2021.

Brendan McDermid | Reuters

Wall Street's top strategist Marko Kolanovic believes the new omicron variant of the coronavirus could ultimately prove to be bullish for risk assets as it could speed up the end of the pandemic.