Why this billionaire investor thinks Omicron could be bullish for the share market

Ackman isn’t so sure the latest COVID-19 variant is a negative for markets…

bull market encapsulated by bull running up a rising stock market price

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From time to time, the investing greats offer up their perspectives on what is happening in the share market. Considering the vast wealth of knowledge amassed over the years, investors will often pay close attention to what is said.

The latest news sending a jolt of nervousness through the market is the arising Omicron virus. This new COVID-19 variant has prompted governments to consider life with a possibly more contagious virus. In addition, fears of Omicron potentially being more resistant to current vaccines made the share market shudder.

On the day Omicron was designated as a ‘variant of concern’ by the World Health Organisation (26 November 2021), the S&P/ASX 200 Index (ASX: XJO) dropped 1.73%. However, Pershing Square Capital CEO and billionaire investor, Bill Ackman, is taking a contrarian view.

It might be better for the share market

In a tweet by the American hedge fund manager on Monday, Bill Ackman shared his thoughts on early data for Omicron. It is worth noting, the World Health Organisation is still unsure on whether the new variant is more transmissible or more severe.

However, some reports have indicated that Omicron appears to be spreading more rapidly in South Africa. Because of this, there is speculation over whether the new emerging variant could overtake Delta in the dominance of COVID-19 cases.

Ackman touched on this in his tweet, setting up his thoughts on how Omicron might influence the share market. While investors have mostly reacted with selling pressure since the coverage of the new variant, Ackman is open to a different idea.

If Omicron is less severe but more transmissible, then the outcome might be positive for markets. Although, it is still early days for understanding the details of the new virus.

For Australia, five Omicron cases have now been confirmed. Though, the government is taking a cautious approach rather than jumping the gun to go back into lockdowns. Currently, 87% of Australians over the age of 16 are now fully vaccinated.

Damage report

Over the last 5 days, some share market sectors have been battered and bruised worse than others. Fears of the unknown associated with Omicron has led to investors taking some risk off the table.

The worst impacted sectors include energy and financials, falling 7% and 4.2% respectively in the past 5 days. A possibility of reduced demand for oil and tighter budgets could be to blame. Meanwhile, materials and tech have managed to move higher during the uncertainty.

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Motley Fool contributor Mitchell Lawler has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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