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Omicron Vaccines to Hit Market Soon? ETF Areas to Benefit

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The world is currently grappling with Omicron variant of Covid-19, which is supposedly milder in nature than other variants but way more infectious or transmissible. The strain is believed to be immune to available vaccines which left the world in a difficult position.

Against this backdrop, Pfizer (PFE - Free Report) CEO Albert Bourla said an omicron vaccine will be ready in March, and the company is already manufacturing doses. Bourla said the vaccine will also target the other variants that are circulating. Though he is not sure if at all an omicron vaccine is needed or how it would be used, but Pfizer will have some doses ready since there is a demand from some countries. PFE shares gained 0.9% on Jan 10 and added 0.4% in the pre-market session on Jan 11.

While some experts said that March is too late for an Omicron vaccine, we believe better late than never. Meanwhile, Moderna (MRNA - Free Report) shares jumped 9.2% on Jan 10 after the company’s CEO said Monday that it’s working on a booster that targets the omicron variant of Covid-19 “with public health leaders around the world,” aiming a fall rollout, as quoted on CNBC. The booster will enter clinical trials soon.

Against this backdrop, below we highlight a few ETF areas that could gain/lose on the latest Omicron announcements.

ETFs to Gain

Biotech

Such news will help Pfizer and Moderna shares specifically. Hence, ETFs that are heavy on these two companies should benefit. Below-mentioned biotech ETFs are likely winners.

iShares U.S. Pharmaceuticals ETF (IHE - Free Report) – Holds 22.43% of PFE

iShares Evolved U.S. Innovative Healthcare ETF (IEIH) – Holds 8.43% of PFE

VanEck Biotech ETF (BBH - Free Report) – Holds 9.20% of MRNA

iShares Biotechnology ETF (IBB) – Holds 5.30% of MRNA

S&P 500

Omicron vaccines and boosters mean more reopening of economies, which in turn will help in boosting activities and corporate earnings. Though rising rate worries are currently playing a spoilsport in the equity market, the move higher in rates can’t be relentless and an improving virus outlook should propel the S&P 500 higher. SPDR S&P 500 ETF Trust SPY) has a Zacks ETF Rank #2 (Buy) with a medium risk outlook.

Energy

Oil prices have been rising since the beginning of 2022. In fact, Brent crude and U.S. West Texas Intermediate (WTI) have touched their highest prices since late November. While the upside in the crude oil prices have been led by a variety of factors like easing Omicron variant concerns, protests in Kazakhstan and outages in Libya, steady improvement in the demand outlook for energy will be attained if there is a vaccine targeted at Omicron and other variants. United States Oil Fund , LP (USO - Free Report) should benefit.

Industrials & Materials

Despite a soft overall jobs report, employment in manufacturing (+26,000) was decently upbeat in December. More capex and activities are likely in 2022, which will boost industrial ETFs like Industrial Select Sector SPDR ETF (XLI - Free Report) , which has a Zacks ETF Rank #2 with a medium risk outlook.  Since industrial activities will be on the rise, demand for materials should go up. Biden’s massive infrastructure plan is another plus for this segment. Investors can thus play materials ETF Materials Select Sector SPDR ETF (XLB - Free Report) (read: 4 Sector ETFs to Play Despite Soft December Jobs Data).