Omicron: Micro or Macro?
- By Dominique Dwor-Frecaut and Sam van de Schootbrugge
- 7 minutes read
Summary
• Even if Omicron turns out benign, much uncertainty still exists around the pandemic’s path.
• We estimate US states’ infections and vaccine-induced immunity: both negatively correlate with Covid deaths. By contrast, infection-induced immunity has a stronger negative correlation with cases than vaccine-induced immunity.
• State health authorities focus more on hospitalizations and deaths than cases, suggesting limited risk of lockdowns this winter – assuming Omicron is benign.
• If our view turned out too optimistic, policy support would be limited because renewed fiscal easing would be politically difficult and the Fed has become more hawkish.
Market Implications
• Further curve flattening is likely as the Fed is tightening into a supply shock and exceptional fiscal consolidation.
Summary
• Even if Omicron turns out benign, much uncertainty still exists around the pandemic’s path.
• We estimate US states’ infections and vaccine-induced immunity: both negatively correlate with Covid deaths. By contrast, infection-induced immunity has a stronger negative correlation with cases than vaccine-induced immunity.
• State health authorities focus more on hospitalizations and deaths than cases, suggesting limited risk of lockdowns this winter – assuming Omicron is benign.
• If our view turned out too optimistic, policy support would be limited because renewed fiscal easing would be politically difficult and the Fed has become more hawkish.
Market Implications
• Further curve flattening is likely as the Fed is tightening into a supply shock and exceptional fiscal consolidation.
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