by Greg Valliere, AGF Management Ltd.
Insights and Market Perspectives
Author: Greg Valliere
March 26, 2020
LATE THIS FRIDAY, President Trump will sign into law the $2 trillion stimulus bill that finally passed in the Senate and will win approval in the House tomorrow. The inability of Congress to vote remotely will have to be addressed (Skype seems like an alternative) as lawmakers consider still another measure this summer.
THIS WEEK’S MAMMOTH BILL probably won’t be enough, even as new cases begin to level off in New York in April. There are other hot spots to worry about, New Orleans in particular.
AND THE RECIPIENTS OF WASHINGTON AID are in for a disappointment — it won’t come quickly; checks to individuals and businesses may not arrive for another three weeks, an interminable wait for people on the edge.
SO WE THINK ANOTHER BILL will begin to take shape in May (Congress is scheduled, tentatively, to return in late April). There’s widespread agreement in both parties that the states will need more money, and individuals will need another cash infusion to cover rent and other basics.
THE WISH LIST IS GROWING: House Speaker Nancy Pelosi said yesterday that the next bill will seek to shore up pensions, provide free health care for virus victims and address worker safety issues. There’s always the risk of a “Christmas tree” bill, but this week’s package is fairly clean by Washington standards, with only a few dubious add-ons such as aid to the Kennedy Center.
THE NEXT BILL COULD COST $1 trillion, maybe more, depending on wish list items above and beyond more aid to states and individuals. The budget deficit simply isn’t an issue; it could surge close to $4 trillion this year. In addition to the huge spike in spending, revenues will be sharply lower.
WE’RE IN UNCHARTED WATERS, as governments throw the kitchen sink at the virus. The focus now will shift to the data — unemployment claims this morning, and especially the daily numbers of new infections, now declining in Italy.
WE’RE NOT OUT OF THE WOODS YET, but the monetary and fiscal stimulus has been stunning, with more available if necessary. And the public generally is cooperating on social distancing. The great wild card is a premature U.S. end of the lockdown, which governors and scientists would adamantly resist if it comes before May.
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This post was first published at the AGF Perspectives Blog.
