The Fed is keying on wages: TIAA Bank

Chris Gaffney, President of World Markets at TIAA Bank joins the Yahoo Finance Live panel with the latest on the markets.

Video transcript

AKIKO FUJITA: Let's turn our attention back to the markets here. As we said, we have seen the Dow up more than 160 points right now, hitting a new high in this session on the back of some positive data on the jobs front with initial unemployment claims dipping below that 500,000 level, hitting a pandemic low. Let's bring in Chris Gaffney, President of World Markets at TIAA Bank. Chris, what do you see right now as we look to this data that we got today? Obviously, the jobs report out tomorrow. Things shaping up as positively as we see in the market.

CHRIS GAFFNEY: Yeah, very positive. And I think the-- the big question for investors is, is the Fed going to continue to support the market? And the employment data shows that we are in a recovery. GDP continues to increase. So growth is here, and now we just need to make sure-- and the Fed's going to wait for wages to catch up.

And that's going to be the key for investors, is waiting to see when those wages start moving higher. Because that's the trigger, I believe, of creating the trigger point for the Fed to start looking at tapering or raising rates. And I don't think we're going to see that for a while. Tomorrow we expect to see average hourly earnings increase slightly, but-- on a month-to-month basis-- but still not as quickly as the Fed is really wanting to see.

ZACK GUZMAN: Yeah, I mean, we've been watching inflation pressures elsewhere, the Fed obviously talking about that being transitory. But how are you looking at maybe some moves we've seen in commodities as well, and expectations out there right now in the market for what we might learn tomorrow when it comes to some of those risks?

CHRIS GAFFNEY: Yeah, many commodities are hitting record highs, as you point out. Lumber and a lot of the building commodities-- housing boom is really causing a lot of people to move into the commodities market, and almost a frenzy in the commodities market, trying to get those commodities in order to complete construction.

Oil's kind of leveled off here. So oil is not creating a lot of price pressure, but it's still relatively high to where we were in the previous-- previous year. So commodity price pressures are going to continue as we see these bottlenecks and shortages.

But the Fed feels that that's going to be transitory. While the price increases may stay around for a while, they believe that as the bottlenecks ease, you won't see prices continuing to increase. We're going to see just for the next couple of months, we'll see big price increases. And then that will end.

And the Fed is keen really on wages. And that's what creates long-term price increases. As you see wages go up, as people are earning more-- not on a temporary basis, but on a long-term basis-- that's when you'll see more spending out there and more price pressures, more permanent price pressures on the market.

AKIKO FUJITA: On the commodities front, we've seen a huge surge in demand for copper. Obviously, the renewables push, and this big demand with electric vehicles really pushing that higher. How do you see the supply side keeping up with that? And ultimately, what does that demand mean in terms of how much further the price is going to move?

CHRIS GAFFNEY: Yeah, there's definitely supply bottlenecks on all the industrial metals. And we do think that, you know, it takes a while to pull them out of the ground and get them into-- into the end user. So that is happening now. We're seeing, I'm sure, with the price increasing-- you're seeing more mining being done it. And so that bottleneck will ease over time. It will take some time to work those commodities through the system.

So I think we'll continue to see elevated prices on a number of base commodities, industrial commodities through the end of the year. But then we'll see those prices start easing as those bottlenecks open up.

ZACK GUZMAN: All right. Chris Gaffney, President of World Markets at TIAA Bank. Appreciate you coming on here to chat with us today. Be well.