The Delta variant’s impact on the stock market

The COVID Delta variant is spreading through the US — threatening to destroy months of recovery progress and market gains. For US companies, the COVID nightmare is nowhere near the end.

What’s the big deal? Visitors to restaurants, retail stores and grocery stores dropped in late July after US health officials recommended fully vaccinated people wear masks in public again. And now, companies aided by the recovery are giving investors warnings:

• Slowing travel demand is affecting airlines’ travel sales and profit margins.
• Travel sales have slowed for Booking Holding, an online travel company.

But the impacts go beyond reopening stocks. Companies in various sectors (i.e. automotive, retail) could see another product shortage from:

• Supply chain issues as shipping ports around the world partially close and export-heavy countries in Asia deal with rising COVID cases.
• Lower productivity due to employee absences from mandated vaccinations — as companies already struggle to hire.

With the holidays around the corner, failure to meet product demand could impact sales and profit margins — a repeat of 2020.

Looking forward: Investors anticipated a return to normal with better corporate earnings — but instead of a recovery, they could be in for more volatile company earnings.

But the markets are less likely to be negatively impacted than by previous lockdowns as companies are better prepared — and investors look beyond the short-term market fluctuations.

Risk on risk: The Taliban taking control of Kabul, the capital city of Afghanistan, adds another global risk to markets. Although the direct impacts aren’t clear, we know one thing: more volatility on top of an already unstable market.