Omicron variant and unfriendly Fed are ‘double whammy’ to stock market: strategist

The stock market has been hit with a double whammy of unsavory news, explains Charles Schwab Chief Investment Officer Liz Ann Sonders.

“I think at this stage in the economic cycle and the market cycle, the move from very loose policy to tighter policy has been a factor in the volatility [we are seeing]. You add that to an environment where we started to see a tremendous amount of speculative froth and then add to that Omicron [concerns], you get the double whammy catalysts that sometimes can cause an eruption in volatility,” said Sonders on Yahoo Finance Live.

The heightened volatility reflects the one-two punch of Omicron variant concerns and surprisingly hawkish testimony to lawmakers by Federal Reserve Chairman Jerome Powell this week.

Indeed, the markets continue to endure a turbulent stretch as a result, which began with an awful 1,000-plus point loss for the Dow Jones Industrial Average on the day after Thanksgiving.

The Dow plunged 652 points in Tuesday trading, while the Nasdaq Composite and S&P 500 were also deeply in the red. All 30 Dow components were in the red for the session, except for Apple and Merck.

Tepid action persisted into Wednesday, with the Dow reversing a 520-point intraday gain to finish down 461 points. Markets were in the green by early afternoon trading Thursday, but traders remain on high alert.

Sonders is in good company with her view on the Fed injecting unknown into the markets. 

“I think the risk for the market generally is how the market responds to the Federal Reserve kind of tightening up financial conditions,” Pershing Square Capital founder Bill Ackman told Yahoo Finance. “I think that’s the risk for the market.”

As for what moves one should be making in this riskier market backdrop, there continues to be a firm bull camp on Wall Street who believe buying dips is prudent. 

“I think if there are certain names you have been wanting to add to your portfolio, you can use [weakness] to your advantage,” said Crossmark Global Investments Victoria Fernandez on Yahoo Finance Live. Fernandez believes the market reaction to this week’s news has been “overdone.”

Fernandez said she is buying Apple’s stock on weakness, for instance. 

Brian Sozzi is an editor-at-large and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.

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