Yesterday while testifying before Congress, Federal Reserve Chairman Jerome Powell urged politicians to set aside their differences. He asked them to approve another round of stimulus checks for Americans and the economy. Powell believes this will help ensure that the economic recovery doesn’t stall.
“Many borrowers will benefit from these programs, as will the overall economy,” Powell said. “But for others, a loan that could be difficult to repay might not be the answer, and in these cases, direct fiscal support may be needed.”
Treasury Secretary Steve Mnuchin also testified before Congress. He was questioned about his support for another round of stimulus checks.
Mnuchin said that the White House was in favor of another round of direct payments. “The administration does support another stimulus payment,” he stated. When questioned by Michigan Democrat Rep. Rashida Tlaib about why the payments haven’t been approved, he added, “We obviously can’t pass a bill in the Senate without bipartisan support. Our job is to continue to work with Congress to try to get additional help to the American public.”
Here are what four market analysts had to say when asked how another round of stimulus checks being approved – or not – will affect the economic recovery.
Eugene Profit serves as the president, CEO and managing director of Profit Investment Management. He says he doesn’t see the likelihood of bipartisan support to pass another bill before the election. He says without stimulus checks, the idea of a “v-shaped” recovery could disappear.
“We don’t believe that there’s going to be much support before the election due to the fact that the Congress’ attention is focused elsewhere, especially with the unfortunate passing of Justice Ruth Bader Ginsburg,” said Profit.
“For most of the pandemic, investors have been very optimistic about the market and thinking that we’re going to have a straight-line, V-shape-type recovery, and that’s the way we’ve invested, or that’s the way most of the market is invested. We don’t think that’s going to continue,” he added.
Glenn Hutchins is the chairman of North Island and a co-founder of Silver Lake. He says everyone’s expectations for the market recovery assume another $1 trillion of stimulus. Hutchins warns that it would be a “significant issue” if we don’t get another relief bill passed.
“One example of the politics getting in the way of all this right now is that we can’t get another stimulus package, which we clearly need, which both sides think we need. There’s a fair amount of debate about how big it should be, how it should be targeted, but there’s nobody saying we can’t have it and we don’t need it and we’re not going to have it because of the politics of the season we’re in right now,” said Hutchins, “By the way, these projections that we’re looking at right now … all assume at least $1 trillion or more of stimulus. So, if we don’t have that, that will be a very significant issue.”
Dan Niles, founding partner and portfolio manager at Alpha One Capital Partners, said he expected a bill to be passed. However, nobody is going to compromise on a stimulus bill. This comes as both sides now digging in over the Supreme Court nomination. If we do manage to get one, Niles thinks it will boost the market as much as 10%.
“I felt like it would take the market really going down hard for politicians to be forced to act like grown-ups and come together with something that’s good for the country, and I felt like we were almost there. Now, with the Supreme Court fight on, I think you’re back to both sides not wanting to compromise. But… I think it could be good for easily a 5% to 10% move on the upside, potentially, if we get it.”
Ed Yardini, president of Yardeni Research, thinks that the government can spread enough money around in the next few months. He believes this stimulus distribution will keep things going until the economy can stand on its own.
“I reckon that there’s still enough of this government stimulus that it’ll keep the economy growing probably through September, October, maybe November. And hopefully along the way, we’ll see employment continue to pick up so that the economy can grow on its own without necessarily needing another or at least another big stimulus package.”
What are your thoughts? Will we get another round of stimulus checks before the election? Or will Democrats refuse to negotiate in good faith? Leave your comments below.