Everybody Knows

Everybody Knows

"I'm not sure I'd use that picture." Is what I would have told whoever's in charge of selecting the stock photos for the articles that appear on the The New York Fed's website. "Inflation expectations continue to move up," the bank said, announcing the release of its latest consumer survey. The headline was accompanied by an image of an old woman bundled up in a wool coat and a pink scarf despite being inside a grocery store. She's getting change from a cashier after buying a paper sack full o
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9 thoughts on “Everybody Knows

  1. Someone needs to change the Fed’s mandate.

    An average man making an average salary should be able to buy a house in reasonable time frame.

    If asset prices are out of hand, relative to real wages, then that’s NOT OK.

    I assume policymakers understand that. I assume the Fed itself also understands that. It’s time they make it explicit.

    1. The Fed’s tools are blunt instruments. It can only pipe money into the financial system, where it goes to where-ever money goes to. That last is up to our elected officials, who are currently busy with their political knife fight.

    2. Home ownership in 2019 in America was 64%, and median household income was 68,700. I think the argument can be made that the Fed’s actions are working fairly well for the “average” American. The problem areas are the bottom and top of the bell curve

  2. That High School vs. No High School graph is really interesting to me. Why would graduating High School make you less likely to own stocks than if you hadn’t graduated High School or had gotten a college degree?

    1. cdameworth — interesting point and here’s my bald guess — the no high school group may be skewed by young adult celebrities and stars who are busy earning outsize riches while they should be in high school and then never go back. If that is a valid hypothesis, then we might see the same skew in ownership of luxury goods like expensive watches, cars, boats, etc.

  3. I suspect the new bit of context – that Delta has now pretty clearly peaked – should affect one’s Fed-gaming model. Delta turning down

    Kind of leaves equities in a pickle, IMHO – if Sep and Oct employment reports still miss, then something mysterious will clearly be broken and equities will feel pain. If Delta peaking gets the job market off the fence as I expect then “employment solved + post-Delta” will greenlight taper/rate fears in earnest and equities will feel pain. I personally discount that the earnings story could suddenly improve enough in this market to offset valuation fears.

    Honestly, I wonder a bit if Delta peaking (plus the latest inflation horror show) puts a September meeting announcement back in view. Another week of Covid data will be fairly definitive since the case acceleration rate has been negative for some time now. It’s not like employment stats where there’s always a rationale for the Fed to want to see more data. Virus numbers in a 350 million population are more like a supertanker turning; when you see it, it isn’t a wiggle.

    tldr – Delta peaking concretely moves numerous fear factors from the foggy future to the rear view mirror. The Fed is reduced to clearly fighting inflation. Market bulls will be left fighting the Fed.

    1. I can only hope that you are right about the delta variant (and Covid in general) “peaking” (and I use those scare quotes intentionally, as we are prone to do now, not for cheap laughs or empty hyperbole, but because it’s sadly TRUE). Seems like Covid peaking is giving a 5% S&P correction a run for its money in terms of false but reasonable expectatioms.

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