CNBC’s Pisani: “the markets have been acting like the virus has gone away”
- CNBC's Pisani says another wave of COVID was not a part of the market narrative up until this week.
- The delta variant and others could potentially weigh on earnings and the economy at large.
- Some parts of the market are very oversold, resulting in the advance/decline line turning down this month.
2021 has been celebrative for investors so far as stocks recovered, sectors boomed, and indices were up. But all of that might be set to change with the rise of the new Delta variant – a glimpse of which has been evident since last week.
The markets have been acting like the virus has gone away, but it hasn’t, says CNBC’s Bob Pisani.
Another wave of COVID is not priced into the market
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Another outbreak that could potentially weigh on the economy is not factored into the market. If the new COVID variants push the world towards another lockdown, companies will again start to be more cautious about their earnings guidance for the rest of the year.
According to CNBC’s Bob Pisani, the market narrative up until this week has been based on the following:
- The virus is slowly going away, and any breakouts will be manageable.
- We are “peak everything”: peak earnings and peak economic growth.
- Earnings will continue to grow, but the rate of growth is slowing, implying multiples (P/E) ratios will be coming down.
- The “inflation is transitory” debate has not been settled, but lower bond yields imply the Fed still has the upper hand.
Some parts of the market are very oversold
What’s given is that the new COVID variants could potentially hurt earnings again, particularly for travel and leisure companies. It is, however, too soon to predict how strongly could investors take the hit in different sectors.
Pisani also highlights that some parts of the market are very oversold, resulting in the advance/decline line turning down this month. According to Stadium Capital’s Joe Zicherman:
The market has been slowly eroding for weeks. I haven’t had an up day in my account for a month.
At the time of writing, the benchmark S&P 500 index, Dow Jones Industrial Averages, and Nasdaq are down roughly 2% each compared to Monday, July 12th.