This is shaping up to be another Christmas overshadowed by Covid-19. Lines for testing in New York City have suddenly lengthened. Apple shuttered three retail stores in North America after a rise in Covid-19 exposures among employees. Broadway theaters are canceling productions. Colleges are shifting exams to online only. What’s the bet that numerous holiday gatherings planned for the next two weeks get canceled?
Despite the gloomy outlook, stocks are rising on Wall Street. We’ve seen that disconnect before, most notably in February of 2020, as worries about Covid-19 in China spread but U.S. investors didn’t react. Right now, investors appear to be mostly focused on expectations about interest rates. The Fed today signaled it would raise rates next year, although the precise timeline is unclear. For anyone worried about inflation, that lack of urgency is unnerving.