Markets are fed up with closures: “They inflict economic, social and mental damage”

Markets Are Fed Up With Closures: “They Inflict Economic, Social and Mental Damage”

The bags do not want confinement , and they have made it clear with their behavior in recent days . On Monday, after knowing the closure of the Dutch population at least until January 14 , the indices suffered considerably. On Tuesday, when the United Kingdom and the United States practically ruled out drastic measures for Christmas, stocks celebrated.

“The arguments against the closings are beginning to be heard,” says Michael Hewson, chief analyst at CMC Markets in London.

British Prime Minister Boris Johnson ruled out Tuesday that stricter rules would be applied to contain the pandemic before Christmas, trying to end speculation that the British may have to scrap their holiday plans for a second year. For his part, the president of the United States, Joe Biden , said that they will not impose the strict closures of last year. However, he urged Americans to get vaccinated as soon as possible.

“While some members of the (UK) Government seem very keen on locking the population in, there seems to be a growing reluctance to reach for the lock lever whenever the going gets tough when rates of infection begin to increase, “explains Hewson.

“Little by little, it is being recognized that the closures are a crude tool that inflicts considerable damage at the economic, social and mental health levels , something that, fortunately, some in the Government seem to be beginning to recognize little by little, and the rebound Tuesday’s market seems to be a reflection of that awareness, “adds bluntly the head of analysis at CMC Markets in London.

“There is also the added factor that this reluctance to impose new and strict lockdown measures on the doors of Christmas could be due to the fact that, even if restrictions were imposed, it is unlikely that they would be observed by populations increasingly weary of the pandemic, “concludes Hewson.

ADAPT AND MOVE FORWARD

For Naeem Aslam, head of analysis at the British firm AvaTrade, you have to get used to the “new normal” , which consists of new variants of Covid emerging from time to time, such as the flu. “So the only option is to adapt quickly and keep up with changing circumstances ,”he says.

At the same time, Aslam notes that investors should bear in mind that the US economy was able to successfully cope with the Delta variant of Covid because it relied on “docile” monetary policies, which injected liquidity into the markets.

“However, this will not be the case this time, so it will serve as a test to see if the US economy is finally strong enough to withstand the Omicron variant in the absence of accommodative monetary and fiscal policies,” he acknowledges.

THE REIMPOSITION OF RESTRICTIONS MAKES MELLA IN THE RECOVERY

Restrictions to control the virus inevitably impact economic recovery. Economists insist on this point repeatedly and emphasize the negative impact of the toughest measures in particular.

“The re-imposition of restrictions and voluntary social distancing have made a dent in the activity of the eurozone” so far in December, they point out from Oxford Economics. The decline was driven by the drop in consumer spending, especially in intensive contact settings, and in mobility.

Oxford foresees a “sharp slowdown” in economic growth during the winter , with restrictions “remaining in ‘on again / off again’ mode in the first quarter.” However, it also acknowledges positives, such as the fact that the labor market remains resilient, while high-frequency data from the industry shows sustained signs of improvement.

“We expect growth to remain weak in the first quarter of 2022 , as well as the risks related to the pandemic to increase with the spread of the Omicron variant ,” anticipates Tomas Dvorak, an economist at Oxford.

Samuel Edwards
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