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Omicron is 'banana skin' for equities going into 2022

“A stark contrast in the approaches to Covid in the US and Europe initially saw European’s attempting to keep people in their existing jobs, compared to the US, which paid enhanced benefits to those who had lost their jobs, even temporarily,” he said. 

“These enhanced benefits were, at times, even more generous than the pay some former employees had lost – naturally that increases demand. To compound this, the US also issued direct payments to individuals in April 2020 and then again in March 2021.”

Foster explained that these fiscal transfers can be successful in boosting demand as they put money in the hands of households who are most likely to spend it, which he said proved to be the case.

“A similar factor came from Covid and lockdown itself,” he said. “This meant many workers were able to work from home, reducing their travel expenses. While that did not reduce demand overall, it did change the type of things which people were spending money on.  

“Having lower travel expenses freed up disposable income which could be spent on more indulgent items.”

sonia.rach@ft.com

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