Few things could have been less welcome as we head into Christmas and it was particularly unhelpful that news broke over the Thanksgiving holiday, as the thinner holiday markets reacted with considerable volatility. So far, each new wave/variant has caused less economic harm than its forerunner, it remains to be seen whether this will be the case with Omicron. It appears to be more infectious than Delta but (unproven) reports of its being less harmful are encouraging and pharmaceutical analysts tell us that the generation of vaccines that are in use are able to be adapted speedily to new variants. We understand that the new anti-viral pills being developed are expected to be as effective against Omicron as Delta for hospitalised patients. That’s quite enough pharmaceutical guesswork, we do not know how much of a problem this will turn out to be, expect speculative tennis over the next few weeks.

Stock markets and commodity prices were knocked-back over the last few days of November which, until then, had been comparatively calm. Though we should add that individual stock volatility does appear to be on the increase again, if not at the level of indices, partially reflected in the sharp moves in the smaller company indices. Gilt yields collapsed, in a market that is still rather thin after the Bank of England’s shenanigans over the November hike/not hike, particularly at the very long end where the 50-year yield is currently lower than the 5-year, at around 0.6%. Quite extraordinary when considering the inflation rate at present… The question now is whether central banks might use Omicron as an excuse to delay their tightening plans. The Bank of England and the ECB meet (separately!) on 16th December. The Federal Reserve (thankfully with Jerome Powell confirmed in place) appears to be holding to the (sensible) line that it is time to taper their asset purchases and that they are considering speeding up the pace.

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