Thinking About the Omicron Effect

The only way to preface this post is by saying that, we just don’t know enough about this new variant to make sweeping calls about the economic or market impact. However, over the weekend I thought of a few ways that could be valuable in terms of evaluating how the market will trade this following the crazy moves that we saw on Friday.

So, this post has two sections: First, what do we know, not much. Second, I think the better approach to assessing the market and economic impact is flipping the potential outcome tree. I.e. looking at the micro distributional effects to see what the general macro impact will be. The question is, what from Friday’s price action was noise/overreaction and what was signal?