Spain went to the polls over the weekend following a decision by Prime Minister Pedro Sanchez to seek a renewed mandate after poor municipal election results in May. The conservative opposition People’s Party was widely expected to form government with the support of the right-wing Vox party and perhaps a constellation of minor parties. However, despite the PP winning the largest number of seats, Sanchez’s ruling Socialists exceeded expectations and managed to add two more seats to their own tally. This was enough to ensure that there is no easy path to the required 176 for any coalition of the right or left. So, having resolved nothing, Spain now enters a political purgatory of sorts as the main parties attempt to convince smaller separatist parties to support their attempts to form a government. Speaking of resolving nothing, the Wall Street Journal this morning carries two stories that give an insight into the challenge facing the Fed’s FOMC. ‘Barbenheimer’, the portmanteau for the Barbie and Oppenheimer films, has propelled the US box office to its fourth-best weekend on record. Opening weekend ticket sales reached $155 million for Barbie and $81 million for Oppenheimer. Meanwhile, Taylor Swift continues to confound attempts at monetary tightening with her Eras tour reportedly on track to become the highest-grossing concert in history, with over $1 billion worth of ticket sales. The Swift multiplier also carries benefits for hotels, airlines and hospitality venues as fans flock from around the world to attend concerts. None of this really paints a picture of a consumer economy that is on its knees, but cod psychology perhaps suggests that people are seeking escapism after years of lockdowns, pestilence and war. Another explanation that has been proffered to me in recent times is that millennials and Gen Z’s in developed countries can’t afford to buy a home no matter how much they save, so why not embrace nihilism and buy those Taylor Swift tickets? That explanation suggests that high asset prices may actually reduce the effectiveness of monetary policy transmission, which is counter to the usual logic.
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