Omicron fears cause mass sell-off: How to trade when markets panic
Fears of the Omicron COVID19 variant sent global markets crashing. Here’s how to trade under pressure.
A new COVID19 variant, Omicron, has sent global markets crashing in the final week of November 2021. The news of the variant sparked an immediate and extreme response from dozens of countries fearing a fourth wave of the virus.
Travel bans have been set in place, specifically baring those traveling from South Africa to the USA, Europe, and parts of Asia.
The result sent markets tumbling and sparked a mass sell-off, the worse of which affected the global fuel price.
Fortunately, you can trade even when the markets are turbulent. In this article, we’ll help you keep calm under pressure and avoid panic selling.
Omicron sparks market jitters
You would think that given that the world will soon enter its third year of the COVID-19 pandemic, global leaders and organizations would have a measured response to possible flare-ups of the virus.
The new Omicron variant proves this isn’t the case as drastic travel bans and lockdowns have been implemented sending the financial markets reeling. For example – the shares of International Airlines Group, British Airways owner, dropped 15% in the Nov 26 sell-off.
The oil price suffered a huge drop; WTI Crude is trading at $68.44 (down from $78) while Brent is trading at $71.80 (down from $82). This will have devastating consequences for an industry already struggling to recoup losses incurred from the disastrous 2020 crash.
The travel bans have also played havoc with the travel and tourism industry. Thousands of flights being canceled or diverted and insecurity over holiday plans will have dire consequences for the aviation and hospitality sectors headed into the traditionally busy December-January period.
Stock markets have recovered some losses despite a huge crash suffered on November 26; the FTSE 100 in London suffered its worst daily percentage losses since June 2020.
Trading is expected to be cautious as a growing number of nations impose restrictions in response to variant cases being detected.
Top advice for traders
Here are top tips all traders should follow during times of uncertainty:
- Stay calm even when markets panic
The crash of March 2020 sent markets into a free fall with the oil industry, crashing from a high of $64/barrel to a near-overnight low of less than $20. Yet a few months after the initial crash, global markets began to recover.
It’s easy to be caught up in the panic and join mass sell-offs but those traders who can remain unphased by the initial panic of a market crash are able to capitalize on market volatility. If you stay calm, watch trends and implement proper risk-management strategies to handle emotional trading”, you could see your way to profitability even in adverse conditions.
- Diversify your portfolio
Investors are warned to never put all their eggs in one basket and this year proved that advice correct. Equities are booming, oil rallied and the crypto market exploded. However, it wasn’t all smooth sailings for those sectors; Bitcoin saw a particularly huge rally earlier in 2021 to a record high of $68,000, then tumbling back to $56,000. Similarly, oil traders were cashing in on a huge boom in travel only to be hard hit by the woes suffered from Omicron fears.
The point is, having a diversified portfolio means more opportunities for profits as well as minimizing your risk should one or more sectors, you’re investing in suffer a crash. From commodities to Index/Bond Funds, a diversified portfolio minimizes risks and reduces panic selling.
- Markets are unpredictable especially in the short-term
News of the Omicron variant shows how volatile markets can be in the short term. It’s easy to be caught up in bearish sentiment yet even major events that have previously rocked the stock market are remedied in the short term.
By developing a trading strategy that you can stick with over the long-term than trying to predict markets daily and react accordingly.
- Volatility equals opportunity
As the markets crashed in 2020, some savvy traders and companies (e.g Amazon) not only managed to shake off the worst of the financial collapse but ultimately thrived in a climate marred by the recession.
Already, companies are pivoting their strategies to take advantage of Omicron; gold traders are pushing as the dollar weakens and tourism sectors are focusing on domestic markets with a predicted drop in international travel. The point is this – where some see only doom and gloom, others see opportunity amidst the volatility.
Spotting trends and predicting possible opportunities in the market is the key to profitability.
- Things could always get worse
Despite vaccines, lockdowns, and travel restrictions, the scourge of the pandemic has followed us throughout 2021 and will definitely be around in 2022.
The energy and tourism sectors have taken the brunt of the Omicron fallout and things could get worse if COVID19 numbers aren’t reduced.
The overall picture is one of positivity though, at least compared to the same period in 2020. It’s important in times like these to reflect on actual data and use that to drive decisions.
There is no guarantee an investment or trade will bounce back; portfolio diversification is key to minimizing your risk, especially when it comes to long-term investments. Recognizing when to stay the course or jump ship is imperative to staying profitable.
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