Above the Fold

Omicron’s Threat Shakes Global Stability

The virus that causes COVID-19 was expected to continue to mutate. The highly contagious Delta variant of the SARS CoV-2 first surfaced in India in December 2020. As that mutation spread globally, it triggered a resurgence of lockdowns, travel bans, disruptions, and obviously increased illness and loss of life. And while there have been many variations of the virus, the latest, dubbed Omicron, has scientists, economic pundits and world leaders concerned. Believed to have originated in Botswana, Omicron has more than 50 modifications from the original coronavirus. Because it’s so new, scientists still don’t fully understand how this virus will impact a global population that’s already built a level of herd immunity through virus recovery and growing vaccination campaigns. 

What they do know is that it appears to be extremely contagious and could have other potentially deadly attributes — those questions are yet to be answered. The reaction to its discovery has been swift and aggressive. Many countries (including the U.S., Britain and all of Europe) have already banned travel to and from South Africa and neighboring countries (where case counts are highest). Other areas are reinstating mask mandates and pushing hard for vaccinations, while states like New York are already declaring a state of emergency to get ahead of any resurgence. 

With cases detected in many other areas, the biggest concern is that this variant may have resistance to current vaccine formulations. Drug makers are already working to test current inoculations and potentially offer new Omicron-specific vaccine boosters if needed. Global equity and energy markets were hit hard on Friday as investors feared another major global impact.  

Three Things 

1. Brick and Mortar Getting Some Holiday Cheer – The store is back this year. We expect U.S. holiday sales to grow between +7% and 10.5% in 2021 to more than $800 billion. While online Thanksgiving sales were flat at $5.1 billion and Black Friday online sales dipped -1% from last year to $8.9 billion, stable online sales were more than made up for by higher in-store sales. U.S. mall Black Friday foot traffic rose +48% compared to last year though it still ran -28% below the 2019 level, leaving room for future gains. Retailers began promotions in late October and spread them out across the holiday season to reduce crowds on peak shopping days and accommodate consumers’ preference for social distancing.
2. Was Friday’s Selloff a “Margin Call” Event? – The rise of individual investors has already brought a staggered amount of borrowed money with it. Margin borrowings are up 42% in October compared to the same month in 2020. And since investors have to pony up additional funds (or be forced to sell) if stocks fall, markets could experience increased panic selling as the number of speculative, self-directed investors grows. The good news is that rebounds, like the one we saw yesterday, can also occur quickly. 
3. Twitter Founder Steps Down – Jack Dorsey, the outspoken and often controversial co-founder of Twitter Inc., will step down as chief executive officer. Dorsey said it was time for the company to “move on from its founders” a year after his leadership was challenged by activist investors. 

Did You Know? 

Just How Important Is the Holiday Season for Retailers?

In 2020, the holiday shopping period between November and December accounted for 19.5% of total annual retail revenue, which totaled nearly $790 billion. Last year, ecommerce accounted for nearly 26% of all sales, and 79% of shoppers did not finish their holiday shopping until mid-December. Aware of the supply chain disruptions, taking advantage of the early promotions, and given the rise of Buy Now Pay Later (BNPL) services, 61% of U.S. consumers began their holiday shopping in October this year, up from 51% in 2020.