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Mr. Market isn’t sure what to think. On Friday, he was petrified of the Omicron variant, on Monday, blasé, on Tuesday back to terrified.

Investors may want to take a deep breath. Yes, what we don’t know yet about the new COVID-19 variant is disturbing. But in the absence of hard facts, rushing to conclusions can be dangerous.

The past few months demonstrate how quickly fears can fade. Remember the Delta variant? As Robert Armstrong of the Financial Times pointed out this week, it resulted in a barely detectable squiggle in a chart of the S&P 500′s course over the past year.

The same point can be made with Canada’s S&P/TSX Composite Index. Look back over the past year and try to detect the moment when the market sold off because of rising Delta cases.

Stocks sink as Omicron, rate worries rattle investors

The Omicron COVID-19 variant is sparking global concern. Here’s everything you need to know

Hint: It was in mid-July. The bigger dip later in the year reflected concerns about rising inflation and interest rates, not disease.

Nobody knows whether Omicron will leave as little lasting impact on share prices as Delta. It hinges on how much of a drag the new variant will impose on the recovery.

The worst case is that it results in renewed lockdowns, prevents people from returning to the work force and overwhelms health care systems. If so, the economic impact could be severe.

The best case is that it proves to be well controlled by existing vaccines – at least to the point where governments don’t have to put their economies back into a deep freeze. If so, the ultimate effect may be to convince central bankers to support growth by keeping rates lower for longer, thus making stocks more attractive.

It will take weeks before we know which scenario will come to pass. In the absence of hard facts, investors are reacting to speculation.

The sell-off on Tuesday followed an interview in the Financial Times with Stéphane Bancel, chief executive officer of vaccine maker Moderna Inc., about his outlook on the new variant. “This is not going to be good,” he declared, saying he expects existing vaccines to be less effective against Omicron than earlier variants because of the high number of mutations.

Others disagree. Researchers at Oxford University, for instance, said in a statement Tuesday that there was no evidence yet that existing vaccines don’t offer a high level of protection against severe disease from Omicron.

They, and others, expressed confidence they can rapidly develop vaccines that effectively target the new variant. In fact, Pfizer Inc. chief executive officer Albert Bourla tweeted Tuesday that his company has established an approach capable of producing variant versions of its vaccine in about 100 days.

For now, investors may want to gauge the state of the market’s nerves by tracking Pfizer’s share price. The giant drug maker not only produces COVID-19 vaccine but has also developed an antiviral pill that has shown early promise in reducing hospitalizations from severe cases of the virus in high-risk patients.

The company’s share price has surged more than 20 per cent over the past month, an indication of just how worried the market is about the virus. But the stock’s volatile path over the past year also demonstrates how quickly things can change.

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