Are Republicans, Democrats Inching Closer To Final Coronavirus Stimulus?
The market gives odds for a quick deal on a final stimulus bill for a nation stuck in its worst pandemic in 100 years at about 15%. We might have an answer to the burning stimulus questions sooner than we thought. Maybe by Wednesday.
Macrolens chief strategist Brian McCarthy put out a note to clients this morning outlining the key components in the final stimulus package, which sees Democratic Party leader Nancy Pelosi lowering her proposal from $3.4 trillion to $2.2 trillion. She also reduced bailout money for states still facing economic restrictions on the service, travel and entertainment industries from $915 billion to $436 billion, a significant reduction on her part.
The Trump Administration says $300 billion is good enough. The two sides are very close, and it is unlikely $136 billion will be a deal breaker.
Of course there is more to a stimulus bill than helping the economy, an economy that is V-shaping along and expected to grow by around 25% this quarter after contracting more than 30% in the second quarter at the height of the pandemic. For the V to keep drawing itself out, economies need to open fully. And people need to feel comfortable in coping with the coronavirus.
There is also the unsavory thought among Democrats, for example, of new stimulus checks going out. That could be viewed as a positive for Trump, who is still trailing Joe Biden in most national polls.
Senate leader Mitch McConnell has signaled that he would allow for an Administration/Pelosi deal to come to a floor vote, without adding much more input to what the two sides have agreed upon. They’ll just vote on what Trump, Mnuchin and Pelosi have come up with.
Pelosi is meeting with Treasury Secretary Steve Mnuchin again today and there is no word of Trump chief of staff Mark Meadows being present. He and Pelosi have bad vibes. She and Mnuchin seem to get along.
For example, Pelosi told CNN’s Jake Tapper that, “When I have a conversation with the (Trump) Administration it is in good faith. I trust Secretary Mnuchin to represent something that can reach a solution and I believe we can come to an agreement.”
With Pelosi lowering aid to the States, it removes a key sticking point in the Republican controlled Senate.
This looks closer than it did last week.
“This sets up nicely for a long punt in U.S. indexes,” McCarthy says. “We should know by mid-day whether stimulus resuscitation efforts are bearing fruit.”
The significant catalyst that will move the U.S. stock markets higher is this aid package. If the package is politicized more than it already has been, then the deal could be dead and markets will fall a bit.
“Market confidence may see an immense boost if we do get another stimulus package, as the message will be clear that this government is serious in providing the support, and it will continue to do whatever it takes to support the stock market and the U.S. economy,” says Naeem Aslam, chief market strategist for AvaTrade.
At least one sector of the U.S. economy is begging for this stimulus package even more than Wall Street.
The American Hotel & Lodging Association (AHLA) released a new survey last week that shows how bad lockdowns and general pandemic concerns have been for the industry as a whole. Seventy-four percent (74%) of hotels said they will be forced to lay off additional employees and two-thirds of hotels (67%) will not make it another six months if Congress fails to pass another stimulus bill.