There’s a lot of uncertainty in markets at the moment surrounding the Omicron variant.

The next few days will be vital. One thing I watch closely is interest rates in the US, particularly the 10-year rates and they dropped significantly overnight. That means markets are taking this seriously.

Travel bans are already being announced around the world, particularly in countries struggling to contain Delta outbreaks.

Oil prices are down significantly, a sign that global travel is about to hit the brakes going into Christmas. So, this is serious and I don’t think we can ignore it.

Most of the developed world is looking towards “life after Covid”, but the recent Omicron outbreak raises vulnerabilities, even if it gets downplayed through scientific research.

Best case scenario the threat wanes and is contained, there will still be hesitancy though that another deadly strain could emerge. Worst case scenario is this brings us back into another, globally coordinated lockdown phase, particularly in the Northern Hemisphere.

There’s a lot of lockdown fatigue around the world but we also don’t have any other practical solution. Government balance sheets are already stretched. The big impact will be on interest rate assumptions, which have recently been rising. We could see them come back significantly.

Oil and industrial commodities look vulnerable. Gold isn’t moving, dead asleep…which means inflation isn’t a big fear.

Bottom line: New lockdowns are bad for travel and hospitality, good for technology names that benefit from lockdowns. The overall stock market is vulnerable, so there could be a short-term correction. This will be an opportunity to buy once the dust settles.

The residential real estate market is also vulnerable in certain parts, we could see more sellers who have been sitting on profits bringing their properties back on the market to lock in gains.

The big takeaway is this – we’ve been expecting things to get better. Light at the end of the tunnel, but Omicron dents this expectation severely. Even if it’s nothing, authorities will be worried about another variant emerging. So, we’re going into 2022 with more uncertainty and more caution.

Market insights and analysis from Peter Esho, co-founder at Sydney-based property investment company Wealthi.