(Former Treasury Secretary Larry Summers is asking a similar question, as he frets the Fed won’t be able to engineer a soft landing.)

The other big question, which also won’t be answered today, is whether stocks can survive the start of Fed tightening, Donnelly says.

Donnelly says the conventional wisdom is that the early stages of the Fed cycle are bullish for stocks, and there are buying opportunities when markets get too anxious. He says the reality is there are normally two waves of equity fears, “and unless you have a 2+ year time horizon you can’t ignore the first one.” The second leg is when the Fed moves into restrictive territory and a bear market ensues. “We are in wave one,” he said.

The current economic cycle, he says, is on “hyperspeed,” and the current state of macro is reminiscent of 1999 and 2018 — the “massive retail bubble and hype cycle” like 1999, with inversions like 1999 and 2018.

He crunched data on forward S&P 500 returns depending on the starting point of the 2-year/4-year spread in Eurodollars
ED00,
-0.01%.
Right now it is on the worst part of that chart as the spread is 0.05.

Forward S&P 500 returns based on spread between 2- and 4-year Eurodollar futures
	+3 months	+6 months	+1 year
All data	2.4%	4.8%	9.8%
	1.9%	4.1%	9.6%
. 9	2%	4.3%	9.9%
. 8	2.2%	4.7%	10.6%
. 7	2.5%	5.2%	11.4%
. 6	2.7%	5.8%	12.1%
. 5	3%	6.2%	12.4%
. 4	3%	5.9%	11.5%
. 3	2.4%	5%	10%
. 2	1.1%	2.7%	8%
. 1	1.5%	2.5%	5.8%
–	-1.6%	3.3%	10.5%
Source: Spectra Markets

As of Tuesday, he was short S&P 500 futures
ES00,
-0.05%
at 4684, and recommending taking profits at 4545, and short Ethereum
ETHUSD,
+0.04%
at $4,210, and taking profits at $3,010.

The buzz

The Fed decision is due at 2 p.m., followed by the press conference at 2:30 p.m. with Fed Chair Jerome Powell. Markets are expecting the announcement of a faster taper of bond purchases so the central bank is in a position next year to make multiple hikes.

Economists at Nomura say the dot plot may show eight rate increases over the next three years, up from six previously, with two in 2022 versus half a hike previously. “Powell will likely use the press conference to clearly outline the steps the Committee is taking to ensure high inflation does not become ‘entrenched,’ including potentially preparing markets for earlier rate hikes in 2022, relative to our current expectation for liftoff in September, if monthly inflation does not moderate,” said economists led by Aichi Amemiya.

There are also retail sales data due for release.

A study finds China’s Sinovac vaccine is ineffective against the omicron variant of coronavirus. GlaxoSmithKline
GSK,
-0.49%
and Sanofi
SNY,
-1.48%
said their vaccine candidate was effective as a booster in a preliminary trial. Europe’s drug regulator said it is recommending Johnson & Johnson’s
JNJ,
+1.09%
vaccine as a booster, including for people who received different vaccines initially.

Errant quotes made cryptocurrency traders ‘quadrillionaires’ — on screens if not in reality.

The market

U.S. stock futures
ES00,
-0.05%

NQ00,
-0.23%
were slightly weaker after the second straight losing session.

The yield on the 10-year Treasury
TMUBMUSD10Y,
1.447%
was 1.44%.

Top tickers

Here are the top tickers on MarketWatch, as of 6 a.m. Eastern.

Ticker	Security name
TSLA, -0.82%	Tesla
GME, +7.90%	GameStop
AMC, +5.42%	AMC Entertainment
DXY, -0.06%	U.S. dollar index
TMUBMUSD10Y, 1.447%	U.S. 10-year Treasury note
NIO, -4.04%	NIO
DJIA, -0.30%	Dow Jones Industrial Average
ES00, -0.05%	E-mini S&P 500 futures
AAPL, -0.80%	Apple
NVDA, +0.62%	Nvidia

Random reads

Time’s Person of the Year is back to insulting senators.

A four-year-old got on his dad’s phone, and ordered more than $1,000 worth of gelato.

This room is hotter than the Sun.

Need to Know starts early and is updated until the opening bell, but sign up here to get it delivered once to your email box. The emailed version will be sent out at about 7:30 a.m. Eastern.

Want more for the day ahead? Sign up for The Barron’s Daily, a morning briefing for investors, including exclusive commentary from Barron’s and MarketWatch writers.

What’s driving the markets?

Stocks have seen a tough start to the week as investors brace for the outcome of the Fed meeting, due at 2 p.m. Eastern Time, with a news conference to follow at 2:30 p.m. by Fed Chairman Jerome Powell.

The central bank is expected to announce a faster tapering pace of its bond purchases to combat higher inflation, and with that faster taper will come expectations of higher interest rates. The latter has put particular pressure on growth-focused technology stocks, which are more sensitive to interest rate changes.

Read: 5 things to watch for when the Federal Reserve announces its policy decision Wednesday

The Nasdaq has lost around 2% this month so far, lagging a 3% rise for the Dow industrials and a 1.5% gain for the S&P 500.

“Most interesting will be any signaling on where the Fed sees core PCE inflation next year and in 2023 and the degree to which Fed members have raised their policy rate forecasts relative to what the market is predicting, which is for between two and three rate hikes through the end of next year,” said Peter Garnry, head of equity strategy at Saxo Bank, in a note to clients.

Investors will also be on the lookout for any Fed comments on the effect of the fast-spreading omicron variant on the U.S. economy. The death toll in the U.S. has now surpassed 800,000 from COVID-19, and a study from the Centers for Disease Control and Prevention has reportedly warned of a surge in cases, peaking in mid-January that could overwhelm undervaccinated communities.

That’s as a small study from Hong Kong showed that two doses of one of China’s main vaccines from Sinovac, did not neutralize the omicron variant. The vaccine is also widely used across many developing nations.

Ahead of the Fed meeting, investors will get November retail sales data and import prices, along with the Empire State manufacturing index for December, all at 8:30 a.m. Eastern. The National Association of Home Builders index for December, along with business inventories for October are scheduled for release at 10 a.m. Eastern.

The stock is scheduled to begin trading under the ticker “IOT” on the New York Stock Exchange on Wednesday.

Last week, Samsara estimated pricing its shares between $20 and $23 apiece.

Founded in 2015, Samsara offers a cloud-based platform that allows businesses to use Internet-of-Things connected devices that can range from video cameras to data-collecting equipment to help run operations.

Read: Samsara IPO: 5 things about the cloud-based operations company

Samsara is launching its IPO at a time when shares of recently public companies are struggling. The Renaissance IPO ETF
IPO,
-1.18%
is down 14% over the past 12 months versus a 27% gain on the on the S&P 500 index
SPX,
-0.75%.

“I remain confident that some form of the extended child tax credit will be passed into law,” said Rachel Snyderman, associate director of economic policy at the Bipartisan Policy Center. “What remains unclear is what the specifics of that extended child tax credit will be.”

If history is any guide on the arc of a tax credit that started in the Clinton administration, it suggests some iteration of the current payout will stick around, said Elaine Maag, principal research associate at the Tax Policy Center.

“The Child Tax Credit has been temporarily expanded many times over the years, and we’ve never gone back to a previous version of the credit that was smaller,” she noted. “My hope is this time, it’s true too.”

The U.S. House of Representatives cleared the way for monthly child tax credit payments in 2022 when it passed the Biden administration’s $1.75 trillion social safety net bill last month. But the Build Back Better legislation is on hold in the Senate, where the president cannot afford any Democratic defectors.

That includes Sen. Joe Manchin, a Democrat from West Virginia, who reportedly has concerns about the credit in its current form and worries about the bill’s potential effect on already-high inflation.

Since July, advance payments on the boosted tax credit have been supplying up to $300 for every eligible child up to age 6. The payments are up to $250 for children between the age of 6 and 17.

Last month, the Internal Revenue Service sent out more than $15 billion in payment to households with approximately 61 million children. From July to November, the IRS distributed approximately $77 billion under the credit, according to the Treasury Department.

The credit was enhanced in March, when Democrats passed the $1.9 trillion American Rescue Plan. For one year only, the legislation increased payouts to $3,600 per child under age 6 and $3,000 for children between the age of 6 and 17.

The credit was previously $2,000. The Trump-era Tax Cuts and Jobs Act of 2017 increased the credit to $2,000 from $1,000.

Some families will have to pay back the credit next tax season

On a practical level, one thing that’s definitely coming next is a letter from the IRS to families that received the credit.

The document, dubbed Letter 6419, will be sent next month and it will document the full amount the IRS paid to the recipient.

Hold onto the letter for your records at tax time, the IRS says. The advance child tax credit payments are similar to stimulus checks because the payment have no spending restrictions.

Unlike stimulus checks, however, if a household made too much money by the end of the year, it may have to pay back the excess child tax credit advances at tax time. The IRS has said it will likely do this by skimming the owed amount from the income tax refund.

People who wanted to avoid this kind of tax season surprise had the chance to skip out of the advance payments.

Households making less than $75,000 were more likely to spend the monthly payments than households above that point, according to Maag’s research of U.S. Census Bureau information. Around half of people said they used the credit cash for food. When people spent the credit’s cash, clothing and utilities accounted for 30% and 29%, while school books and supplies accounted for 25%.

The credit has contributed to sizable drops in child poverty and food insufficiency, according to Columbia University researchers.

Some polls paint different pictures on public perception of the expanded tax credit. For example, most parents (64%) who received the credit said it helped “a little” and 15% said it helped “a lot,” according to an NPR/Marist poll this month.

Another says families — especially low-income ones — will miss the payments dearly. One half of people said it would be harder to meet their family’s needs without the payments, according to a poll from ParentsTogether Action, an advocacy organization. Most people in the poll made less than $75,000 and over one-third said they couldn’t meet their family’s basic needs without the payments.

The political questions on what’s next

To be clear, the child tax credit isn’t going away if the expanded form doesn’t live on. It would just revert to its $2,000 cap, Maag noted — including rules allowing $1,400 of the sum to be fully refundable to low-income families without a tax liability, she added.

The House version of Build Back Better permanently makes the credit fully refundable.

Alterations on payout amounts and income thresholds are some of the ways lawmakers might find room for compromise, Snyderman said. In the current version, full payments go to individuals making up to $75,000 and $150,000 for married couples filing jointly.

Many Democratic lawmakers don’t want a turn back to the former version, not when they say many families have come to depend on the monthly money source. That’s why the bill needs to move quickly so families get another payment in the middle of January without any interruption, supporters said.

Rep. Rosa DeLauro, a Democrat from Connecticut, who’s been a longtime advocate for the credit, said the IRS could be nimble and pull off a tight turnaround from enactment to new round of checks. “I have been told we can move and we can move quickly,” she said.

The IRS started distributing second- and third-round stimulus checks days after enactment.

“If we miss this moment, it’s not coming back again,” she said. “We have to seize it.”

Youngkin focused on public safety and schools—in particular 1619 Project and critical race theory narratives that the Republic was founded to perpetuate slavery and parents’ right to define what their children learn.

School officials say CRT is not formally part of the curriculum but its tenets have become deeply embedded in teacher training. In Fairfax County, just outside Washington, social studies teachers are told that it is “a frame” for their work.”

Complaining parents

Parents are complaining nationwide and running opposition slates in school board elections, and attacking CRT could prove a winning issue for Republicans in the midterms.

We should offer children a reasonable account of the nation’s founding, the shortcomings of our past and progress toward greater equality, but Youngkin and others will find the cultural movement in the education establishment difficult to root out.

Still, Republicans should not genuflect to the racism and sexism peddled by radicals among progressives, feminists and Black activists. Aspects of culture in some minority communities and the cancel culture impulses of the woke executive class need as much fixing as white middle-class structural racism.

Youngkin promised to ban critical race theory from schools but also talked about generally failing schools, rising crime, the high cost of living and inflation and faltering economic growth—and tax relief.

Morally bankrupt

Defunding the police is morally bankrupt—rising murder rates in American cities are terrorizing minority communities.

The George Floyd tragedy compels focus on better trained police officers, not handcuffing or taking them off the streets. Racial disparities in enforcement are not addressed by refusing to enforce shoplifting laws and other misdemeanors. Those policies just provide street academies for young criminals and deny the elderly reasonable access to groceries, drugstores and prescription services.

College admissions without objectively applied academic standards do a disservice to children—bright or ordinary, black or white. Requiring that college admissions and credentialing return to sound evaluations of aptitude and achievement and abandoning gender, transgender and racial quotas—and whatever else progressive intellectuals can dream up to fuel the injustice industry—would force elementary and high schools to better prepare students or be deemed failures themselves.

Republicans need to address that colleges are producing too many ill-prepared graduates and get behind alternatives like apprenticeships that provide shorter and less costly paths to rewarding careers.

Reckless spending

Reckless spending in Washington—in particular, the corrupting $1.9 trillion American Rescue Plan—requires the Federal Reserve to print too much money to enable too much borrowing.

Printing-press monetary policy, as practiced by a politically compromised Federal Reserve chairman, Jerome Powell, does nothing to create new chipmaking capacity, unlock overcrowded ports, or otherwise unclog supply chains.

The stimulus package has left a huge overhang of unearned purchasing power that drives up the prices for everyday essentials like gasoline, groceries and restaurant meals, as do Biden administration policies that curb oil and gas production and drive up agricultural fertilizer and transportation costs.

No-work-required child tax credit checks, bigger food stamps and health insurance subsidies make America the first civilization with a leisure class at the bottom and chronically short of workers.

Republicans should affirm that the transition to a carbon-free economy at midcentury requires adequate sources of fossil fuels today and for all Americans to pitch in and work.

Negative narratives

The progressive wing of the Democratic Party is defining the agenda in Washington and casts a negative narrative about America. Whites are endemic racists, markets and society are rigged, and American power in the world is a negative force.

The horrific conditions that will beset Afghanistan this winter is a stain on the souls of President Joe Biden and the progressive foreign policy establishment—they knew what would happen and withdrew American forces anyway.

The world is a nasty place. Open borders will only overwhelm and impoverish Americans who must compete for jobs and educational resources with a mass migration of unskilled workers that flood labor markets.

At every opportunity Republicans should pound Democrats for their irresponsible defense and open-border policies. Those self-serving progressive peddlers of national doubt, guilt, weakness and appeasement deprive the world of some shield against evil and Americans of the security and opportunities for the decent lives they deserve.

Peter Morici is an economist and emeritus business professor at the University of Maryland, and a national columnist.

More from Peter Morici

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Powell and Biden are rolling the dice on inflation and growth

Instead of standing up to Russia and China, Biden appeases them

The FHFA’s review of appraisals focused particularly on what appraisers wrote on appraisal forms in free-form fields related to neighborhood descriptions and other attributes.

“From millions of appraisals submitted annually, a keyword search resulted in thousands of potential race-related flags,” FHFA senior examination specialist Chandra Broadnax and FHFA associate director James Wylie wrote in a blog post Tuesday.

Many of these references did end up being false positives, they noted, but they published a series of examples of language that appraisers used that made clear reference to race, ethnicity or other protected classes. For instance, multiple appraisers cited the demographic profiles of neighborhoods, including the area’s racial make-up or the percentage of the local population composed of immigrants.

One wrote that an area was “originally founded as a whites-only city or sundown town” but had become “fairly diverse” with a “diverse school system.” Other appraisers noted how a neighborhood’s population had changed over time, citing gentrification.

Other examples the FHFA highlighted included an appraiser who noted that a nearby shopping plaza featured “storefronts supplying Jewish Households,” while another referred to an area with a growing immigrant population as “one spicy neighborhood.”

The report didn’t indicate whether appraisals that contained potentially biased language had lower appraisal values.

Broadnax and Wylie wrote in their blog post that the appraisal industry could combat this avenue for bias by providing more guidance on how appraisers should use the free-form text fields on appraisal forms.

“By updating industry norms on the type of neighborhood information that is appropriate to include and moving neighborhood descriptions away from the examples we shared above, we can begin to establish more equitable assessments that ensure fair and unbiased property valuation for all,” they wrote.

The interagency task force on appraisal bias is set to provide recommendations to the White House early next year, with information on the causes and consequences of property misevaluation throughout the country.