The little boy who cried “WOLF!” on Covid.
Lawrence Young
Senior Wealth Manager with 30 years of experience. Personally servicing clients in 26 countries. Creating growth for my clients through portfolio building and continued management.
I’m sure you are all familiar with the Aesop’s Fables story of the little boy who cried wolf too many times. The little shepherd boy who kept crying wolf to let the villagers know that a wolf was attacking their sheep. Although the little boy new that there was no wolf and kept on doing it creating a false alarm. Until one day a wolf really did come and when the boy cried 'wolf' no one came to chase it off thinking it was another false alarm and all the sheep died.
It reminds me of the current situation with every new variant of Covid that is announced. We now have yet another, and although none of these variations should be taken lightly, I cannot help but feel that the newspapers absolutely love it when a new one is announced so they can pump out even more scaremongering headlines which do their intended job as ‘clickbait.’
All previous variants have been found to be pretty much covered by the current vaccines and the headlines always remain the same using words such as ‘could’ or ‘might’ to suggest that the new variants 'could' or 'might' bypass the immune system or the vaccines available will no longer be useful against the new variant.
Each time it appears to be pretty much a false alarm and the media giants that shout COVID instead of WOLF, get away with it. It feels like irresponsible journalism and I, like you I am sure, would prefer to hear the actual proven facts, but that those headlines wouldn’t get you to click on the story would they. We all sucker in to these headlines and the effect can be immediate and widespread, especially in the markets.
You may have noticed the trends by now. There is always a flight from risk in the investment world on the release of new headlines such as a new variant with investors dumping their stocks in travel, hotels, airline companies, casinos, and anything related to another lockdown. Regardless of whether it is actually proven or not. Some stocks fare well and some suffer as the money just moves from one area to another. You need to make sure you can take advantage of these rather seismic shifts as and when they occur.
Factor in inflation worries and you really need to be on the ball and ready to react. The day traders at the moment will be having a nightmare keeping up with the news so it is the longer term player that should fare well again. But that is always true anyway.
If you are not sure what I am talking about, just take a look at the price of oil. The biggest one-day drop by over 10% since April last year on fears that we may well end up in yet another lockdown.
We don’t know yet how serious this new variant is but the same was said on ALL previous variants. So I guess we have to assume or even hope that this one is the same. If it is, then all those investors just took a beating for nothing that sold out of their positions and they would have been better of just sitting tight, because like all the other previous variants, they were eventually shown to be ‘OK’ with the current vaccines and the stock prices swung back again. Historical lessons are not being learnt. You can’t blame investors for being nervous but let’s follow the facts, not the hearsay.
So either stick where you are and ride it out or look for inflation free and risk-off assets that are not exposed to Covid. For me, I'll take my chances and if anything, view this as an absolute diamond opportunity to buy on the bounce at the low prices.
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