by Greg Valliere, AGF Management Ltd.
Insights and Market Perspectives
Author: Greg Valliere
March 19, 2020
WE’RE HARDLY NAIVE: The coronavirus will claim thousands more victims, and the U.S. economy will contract for several months. That’s not news. What is news is the emergence of several encouraging signs; here are five:
1. China reported no new local cases yesterday; life is returning to normal there.
2. Worries over liquidity have prompted even more dramatic action from the Federal Reserve, which announced just before midnight last night that it will resurrect a major tool from 2008, the Money Market Mutual Fund Liquidity Facility. We reiterate: the Fed will do whatever it takes to prevent a liquidity crisis; the banks are very well-capitalized.
3. The Senate passed, and President Trump signed, a $100 billion package of aid to victims of the virus — steps such as paying for sick leave, boosting unemployment benefits, increasing food stamp payments, funding free virus testing, etc.
4. Now the heavy lifting begins on a massive bill that will cost a minimum of $1 trillion — probably more — that will send checks to virtually all Americans in early April and again in mid-May, bail out businesses and allocate more funds for health care. This may take a week or two, but money is no object.
5. A sense of national mobilization has taken hold in Washington and throughout the country. Aside from some clueless idiot kids at Florida beaches, there’s a growing sense of purpose, that we’ll get through this. We’ll look after family and neighbors.
OUR INDUSTRY IS FAMOUS for anticipating what will happen six months down the road, and what we clearly detected yesterday when talking with investors is that a market bottom is within reach — and everyone has a wish list of cheap stocks to buy when the bargain hunting begins.
TO REITERATE, WE’RE HARDLY NAIVE: Outside of Asia, the virus will get worse before it gets better, and people who live check-to-check are scared. But monetary and fiscal policy definitely will “go big” as the government mobilizes with a massive response, unlike anything since the 1930s.
The views expressed in this blog are provided as a general source of information based on information available as of the date of publication and should not be considered as personal investment advice or an offer or solicitation to buy and/or sell securities. Speculation or stated believes about future events, such as market or economic conditions, company or security performance, or other projections represent the beliefs of the author and do not necessarily represent the view of AGF, its subsidiaries or any of its affiliated companies, funds or investment strategies. Every effort has been made to ensure accuracy in these commentaries at the time of publication; however, accuracy cannot be guaranteed. Market conditions may change and AGF accepts no responsibility for individual investment decisions arising from the use of or reliance on the information contained herein. Any financial projections are based on the opinions of the author and should not be considered as a forecast. The forward looking statements and opinions may be affected by changing economic circumstances and are subject to a number of uncertainties that may cause actual results to differ materially from those contemplated in the forward looking statements. The information contained in this commentary is designed to provide you with general information related to the political and economic environment in the United States. It is not intended to be comprehensive investment advice applicable to the circumstances of the individual.
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This post was first published at the AGF Perspectives Blog.
