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In 2020, after the original Wuhan incarnation of COVID, we experienced several months of stock market mayhem, with more than 30 per cent knocked off the value of Australian shares within a month, followed by another 18 months of economic fallout. Oil and gas prices went into a downward spiral and Australia joined the world in flooding their respective economies with financial stimulus.
The economic effects had a longer tail than the market - mainly due to the second wave of infection resulting from the Delta strain, which buffeted the earnings of many companies particularly those involved in hospitality, leisure, tourism and bricks and mortar retailers who were unable to open their doors to the public.
But it took a year for markets to recover to their pre-pandemic levels.
Fast-forward to today and the response to the new COVID strain may be compressed into a week. The benign response from markets on Monday is in large part due to soothing noises from health experts and governments that the symptoms of the Omicron variant may not be as severe.
That said, it is early days and experts are desperately focused on trying to validate this view and to understand whether the current crop of vaccines are equally effective against this strain.
Sydney Airport arrivals from southern Africa have tested positive to COVID-19 amid concerns about the new Omicron variant. Credit:Brendon Thorne/Bloomberg
While it is too early to tell whether Omicron is another variant with Delta-like impact, the markets are responding differently.
They are treating last Friday’s extreme response as overkill - and Monday saw, if not correcting, certainly a calming of sentiment.
In Australia, we have successfully implemented an insurance policy of having close to 90 per cent of the population vaccinated - albeit one that relies on Omicron not being vaccination resistant.
Most other developed countries have vaccinated about two-thirds of their populations and should be close to 80 per cent by the end of the year - offering significant protection - albeit not enough to deal with the fourth wave of the Delta virus that is moving through Europe.
It is too early to say whether the reasoned response from the markets will become the norm. While local investors have resisted the urge to be overcome by fear, a couple of nasty sessions in the US could send the alarm bells ringing before Christmas.
The Market Recap newsletter is a wrap of the day’s trading. Get it each weekday afternoon.