Should Investors Fear The Delta Variant?

Published on: 08/12/2021

In this edition of Chart Talk, Tony Ogorek and Jeff Viksjo discuss the reopening of the economy and how the delta variant could affect the stock market.

TRANSCRIPTION:

TONY:

Welcome to this edition of Chart Talk.  I’m Tony Ogorek and I’m here with Portfolio Manager, Jeff Viksjo.  Today, we’re going to talk about the reopening of the economy, what it means for the stock market, and we’ve got a couple of contrasting stories here.  But before we get into that Jeff, let’s take a look at this chart which looks at some activities that people engage in.  Some of them are pretty much close to the way it was pre-pandemic, others not so much so.

JEFF:

And Tony as you know, it’s been a tale of two markets this year.  The first part of the year, the re-opening trade did very, very well.  So things like travel and retail. Stocks in those sectors performed very, very well.  Since then, it’s been a change, it’s been those hunkered down stay at home stocks that have done well.  Part of that is the Delta resurgence that we’ve had.  This chart gets to, where are we in that re-opening trade, where are we back to normal.  Things like socializing with friends and family, they’re close.  But if you look at travel and dining out, we’ve got a long way to go.

TONY:

So apparently we’re not socializing at restaurants to the extent we were before.  But something that’s really interesting, Jeff, is the CDC just came out with some information recommending that people who are vaccinated begin wearing masks in areas of high concentration of unvaccinated individuals.  And I gotta think this is going to have deleterious impact on the economy and therefore the market down the road.

JEFF:

Yeah Tony, we’ve talked about this before that the bond market and the stock market are saying two different things.  The bond market is worried.  Rates on the 10-year treasury are down way back from where they were in April and March.  The bond market is saying this re-opening is in trouble, partly because of the Delta resurgence and possibly might have to wear masks again.  The stock market, at the same time, is at record highs.

TONY:

Yeah and Jeff, the Federal Reserve can only do so much.  They’ve pretty much pulled all the stops out and I don’t know that there’s a whole heck of a lot more they can do.  So we are, sort of, in a precarious position where markets are close to all-time highs, but the bond market is signaling that there may be some dark clouds ahead.  So, we’ll just have to wait and see how that plays out.

Thank you for joining us in this latest edition of Chart Talk and we look forward to seeing you soon again.

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