May 20, 2022
People wearing masks in Vienna, Austria

The increase in Covid-19 cases abroad and the potential for new restrictions in order to prevent the spread of the virus has spooked US investors. With European nations struggling to contain a deadly fourth wave of the pandemic, it has brought the possibility of another winter of Covid-related disruptions into focus.

The Dow Jones Industrial Average closed down 1.4%, while the S&P 500 was virtually flat, closing with a marginal loss of 0.14%. The Nasdaq was the exception, hitting another record close at 16,057. Unlike other indexes the Nasdaq is dominated by tech stocks that are one of the few sectors to benefit from the pandemic.

“The possibility of the pandemic continuing well into 2022 is being reflected directly in the market today,” said WNC Equity Advisors’ Scott Jones. “The possibility of a fourth wave in the US is playing on people’s minds, and is prompting moves to safe havens. It’s unexpected for most people, who thought the worst was behind us.”

Austria announced on Friday that it was imposing a new national lockdown to curb the spread of the virus, whilst the German health minister refused to rule out new lockdowns, although the nation has stopped short of imposing one yet. Germany is a major exporter, and any lockdown there will have a knock-on effect for other economies.

Many fear that a fourth wave of the virus is just around the corner for the US, which lags behind other developed nations in terms of vaccination rates. The other issue playing on people’s minds is who President Biden will pick as Federal Reserve Chairperson for the next four years. The current contenders for the position are present chairman Jerome Powell and Fed governor Lael Brainard, who have differing viewpoints on issues such as regulation.