Current vaccines are likely to provide protection against severe illness from the new variant of Covid-19. First reports suggest the symptoms are ‘mild’.
Valuations would appear stretched, perhaps explaining the abrupt nature of Friday’s sell-off. The National Accounts data suggest profits are strong. But government subsidies have played a big role here. And smaller companies are struggling.
Omicron may not tip stocks into a bear market. This should be a false alarm. But the question of just how far margins have risen, is critical, and remains a risk. The investment in technology will have to a pay a big dividend, in terms of automation, for the market’s rosy forecasts on earnings to be realised.
In short, headline NIPA corporate profit figures have been inflated by government subsidies to business which, in the national accounts, show up as a deduction in non-labour costs.
