The Fed, inflation and Spider-Man: Morning Brief

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Wednesday, December 15, 2021

‘Spider-Man’ and a high-class inflation problem

Donning my Captain Obvious hat, I’ll connect a few dots that by now are fairly apparent: inflation remains implacable in the face of rising COVID-19 infections. That is likely to make the Federal Reserve announce that it’s slowing the spigot of monetary policy, which is also making markets temperamental.

“Across the board, we are seeing rising and accelerating inflation,” Clearnomics CEO James Liu told Yahoo Finance Live on Tuesday.

“Most likely [the Fed is] going to accelerate the rate of tapering, … and then we’re looking at probably the first rate hike in the first half of next year,” he said.

However, Tuesday’s hot wholesale prices data — which showed headline inflation skyrocketing nearly 10% year-over-year, a record — and a central bank struggling to get ahead of inflation gives us an opportunity to reiterate something that often gets lost in the debate about price pressures.

That is to say, our current inflationary moment is entirely driven by voracious consumer demand, a high-class problem that’s actually buttressed the economy in ways that can only be described as Herculean. At the risk of oversimplifying, people want to get out, buy things and see people after spending most of 2020 cooped up at home.

Irrespective of COVID-19 variants rearing their ugly head, those impulses have yet to shift appreciably.

For evidence of this, note the observations of Bank of America (BAC) CEO Brian Moynihan and JPMorgan Chase (JPM) President Daniel Pinto, both of whom were quoted as saying spending and consumer behavior are holding up strongly as new virus infections soar.

“I don’t see any impact yet. And if you go out to a restaurant, I don’t see people change their behavior,” Moynihan was quoted as saying by The Transcript.

“The [air travel] numbers, you can see bounce around a little bit… but the reality is it seems like the vaccines continue to work, and we’ll see what that plays out. I’m not the scientist, but it’s got time and the data will get better, but we’re not seeing any behavior change here,” Moynihan said, according to The Transcript.

Meanwhile Pinto cited JPMorgan’s proprietary credit card spending as being a whopping 17% higher than it was before the pandemic. “So the consumers have a great balance sheet. They have accumulated savings over this time,” The Transcript quoted Pinto saying.

And that brings us to “Spider-Man: No Way Home,” the Multiverse-spanning installment featuring the Wall Crawler from Astoria. Amid all the hand-wringing about Omicron, Marvel’s latest blockbuster is poised to reap the highest box-office opening of the pandemic, if rapturous early reviews are to be believed (yours truly will be attending an early show on Thursday).

Should the projections hold up, it would reinforce an idea the Morning Brief expounded upon last week, to at least some criticism. People appear to be looking beyond anxiety-inducing headlines about COVID-19, and renewed masking mandates in New York and California.

Whether that changes in the near-term is anyone’s guess. But with more available jobs than people to fill them and wages on the rise (even if the effect is being offset by surging prices), a consumption driven economy is still eating, shopping — and showing up en masse to movies they want to see.

By Javier E. David, editor at Yahoo Finance. Follow him at @Teflongeek

What to watch today

Economy

7:00 a.m. ET: MBA Mortgage Applications, week ended Dec. 10 (2.0% during prior week)
8:30 a.m. ET: Retail sales, month-over-month, December (0.8%. Expected, 1.7% in October).
8:30 a.m. ET: Retail sales excluding autos and gas, month-over-month, November (0.9% expected, 1.4% in October)
8:30 a.m. ET: Import price index, month-over-month, November (0.6% expected, 1.2% in October)
8:30 a.m. ET: Business Inventories, October (1.1% expected, 0.7% in September)
8:30 a.m. ET: NAHB Housing Market Index, December (84 expected, 83 in November)
2:00 p.m. ET: FOMC Rate Decision

Earnings

Politics

The Senate will hear from top airline leaders. CEOs Doug Parker of American Airlines, Gary Kelly of Southwest Airlines, Scott Kirby of United Airlines and others will appear at 2:30 p.m. ET to discuss “Oversight of the U.S. Airline Industry.”
President Biden is traveling to Kentucky to receive an update on the recent tornadoes. He will visit the towns of Mayfield and Dawson Springs to survey storm damage.