Daily update
Daily update
- US December consumer price inflation is due. Are investors are focused on the Federal Reserve’s policy response, or economic realities? If the former, then headline numbers and Fed comments likely matter the most (the Powell Fed is more about spin than substance). If the latter, then the headlines matter less than the signals buried in the detail.
- Middle-income homeowning US households face lower inflation than the headlines suggest because the fictitious owners’ equivalent rent is still distorting the data higher. This helps account for consumer resilience—the US middle class has more spending power than the data suggests. Resistance to profit-led inflation should subdue parts of the data, and used cars, shelter, and airfares add volatility.
- The European Central Bank publishes its economic bulletin. This is not a market moving event, but there does appear to be some difference between the economists of the ECB (looking for action) and the governing council (exhibiting all the inertia of a 22-person committee).
- Political noise continues. A US Republican presidential candidate dropped out of the contest. Parts of Europe are experiencing popular protest. Markets will struggle to properly reflect political risks this year. Polarization, prejudice politics, and economic nationalism all seem set to increase.