Stimulus Bill Before Election Day? Unlikely, Wall Street Says


Wall Street analysts warn that the death of Supreme Court Justice Ruth Bader Ginsburg—and the ensuing battle over her successor—will engulf Washington and further decrease the likelihood of another fiscal stimulus bill to help the economy recover from the coronavirus recession.

Key Facts

With President Trump pledging to announce his Supreme Court nominee by Saturday, the upcoming debate will “formally eliminate whatever chance may have still existed for pre-election fiscal stimulus,” says Adam Crisafulli, founder of Vital Knowledge.

Stefanie Miller, managing director of FiscalNote Markets, agrees that the battle over the Supreme Court vacancy will be the “death knell for COVID-19 relief prior to the elections,” as Republicans seek to jam through a nominee and Democrats take “dramatic actions” to impede the process.

Economists at Wells Fargo Securities put the chances of another stimulus bill before the election at just 25%, saying that the prospects for an agreement look unlikely given that “both sides seem dug in and willing to wait.”

Given the upcoming Supreme Court nomination fight, “this means that the fiscal stimulus is really all but dead,” wrote Sarah Bianchi, macro research analyst at Evercore ISI.

“Congress simply will not have the oxygen or the bandwidth to sort out those difficult issues” before November, she added.

“The Supreme Court fight is likely to take all the oxygen on Capitol Hill through November,” agrees Chris Krueger, strategist at Cowen, though he adds that more stimulus could still arrive during the lame duck session after the election.

Crucial Quote

Tamara Fucile, a senior adviser for government affairs at the Center on Budget and Policy Priorities, told the AARP that it “doesn’t feel like we’re going to get a deal” and “the closer you get to the election, I think the harder it is.”

Key Background

Lawmakers have been deadlocked for months over the next round of coronavirus stimulus: Republicans and the Trump administration have advocated for a smaller bill that would provide between $1 trillion and $1.5 trillion in aid, while Democrats have insisted on a larger package worth at least $2.2 trillion. In his most recent press conference, Federal Reserve chairman Jerome Powell again reiterated that “more fiscal support is likely to be needed” in order for the U.S. economy to recover from the coronavirus pandemic.

What To Watch For

“Investors should prepare for a VERY busy November and December,” wrote Crisafulli. The results of the presidential election could take several days to tabulate, creating uncertainty which could cause another stock market sell-off. Congress also still needs to pass a new spending bill in order to avoid a government shutdown at the end of the month, he points out. In the latest bid to reach a bipartisan agreement on a spending bill, House Democrats introduced new legislation on Monday that would keep the government running through December 11. But the bill removed several sticking points that sank negotiations last Friday, including around $30 billion in aid to farmers, which Republicans continue to strongly advocate for. Senate Majority Leader Mitch McConnell (R-Ky.) was quick to say that the GOP would oppose the Democratic spending bill, arguing that it “shamefully leaves out key relief and support that American farmers need.”

Further Reading

Republicans Oppose Democrats’ Spending Bill As Government Shutdown Looms (Forbes)

Pelosi Doubles Down On $2.2 Trillion Stimulus Compromise: ‘It’s Hard To See How We Can Go Any Lower’ (Forbes)

A Biden Victory And Split Congress Is Best For Stocks, But Here’s What Would Kill Markets After Election Night (Forbes)

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