Over the last few trading sessions, equities have clawed back most of the Omicron and Federal Reserve- inspired selloff. While this week we are not supposed to hear anything from the Federal Reserve because of their policy to be quiet the week before their FOMC meeting, the rally this week has been driven by good news on the Omicron front. Over the weekend we heard from multiple health authorities that Omicron may not be as severe as feared. Yesterday, Pfizer CEO Albert Bourla showed preliminary lab data that three doses of the existing Covid-19 vaccine neutralize the Omicron variant in the lab. We would note Pfizer's finding are "preliminary" and we expect to hear more in the coming days from other vaccine providers. In the next few weeks, we would expect to hear about that data in complete, well-designed studies on actual patients, about the efficacy of the vaccines towards Omicron. However, market has come full circle, back to levels before we heard about Omicron, clearly indicating that Omicron is not a concern for the market any more (until it does).

Adding some minor juice has been the forward progress in the U.S. on the debt ceiling front. On Tuesday, the House of Representatives passed a measure to allow the Senate to raise the debt ceiling by a simple majority vote, which would allow for the bypass of the 60-vote filibuster threshold. The Senate's top Republican, Mitch McConnell, has reportedly endorsed the plan with a Senate vote expected later this week, setting the stage for the Democrats to unilaterally raise the debt limit, once again averting potential issues. 

Looking ahead, however, the next potential wall for equities will be the CPI report coming on Friday. We're expecting inflation numbers to show signs of peaking. However, the bigger wall of worry is the Fed's upcoming monetary policy meeting (FOMC) next week. Already Fed Chair Powell signaled a willingness to accelerate the bond tapering program, and with the dropping of "transitory," the next item to watch will be comments on potential interest rate hikes in 2022.