Dow Jones has seen a path to recovery after the Federal Reserve announced major stimulus measures on Monday. Here’ a look at how this fiscal stimulus might help to overcome the existing economic challenges.
On Monday, March 23, the White House and the Senate agreed to introduce a stimulus package to combat this economic meltdown caused due to the coronavirus pandemic. Soon after, the markets showed a renewed sense of optimism.
On Tuesday, the Dow Jones Industrial Average surged over 10% moving past 20,000 levels. While Wednesday’s rally was not so intense, Dow Jones still closed with over 2% positive. This was for the first time after February that Dow Jones registered positive gains on two consecutive days.
No doubt, the market is still showing some volatility as stocks of top-tech companies dipped on Wednesday. However, the industries that were the most hit, like aviation, hotels, etc. showed good recovery. Sen. Bernie Sanders has threatened to hold this bill asking the government to put stronger conditions on the $500 billion corporate welfare fund.
Unless Republican Senators drop their objections to the coronavirus legislation, I am prepared to put a hold on this bill until stronger conditions are imposed on the $500 billion corporate welfare fund. pic.twitter.com/7X0o9C4BoO
— Bernie Sanders (@SenSanders) March 25, 2020
While the Dow Jones was actually up by 6%, it lost 500 points in the final minutes on the fear that the agreement between the Senate and White House will hit a roadblock. Speaking of these stimulus measures, Adam Crisafulli, founder of Vital Knowledge, said:
“The stimulus measures will continue acting as equity tailwinds as they seep into corners of the credit market presently locked. But the market is clearly moving much faster than underlying fundamentals and just as sharp declines on prior sessions exaggerated economic conditions, the rebounds will too.”
With the Dow Jones correcting 40% from its all-time high in just a month’s time, some analysts expect a sharp renounce. Former Federal Reserve Chairman Ben Bernanke holds similar views. Speaking at CNBC’s “Squawk Box”, Bernanke said:
“If there’s not too much damage done to the workforce, to the businesses during the shutdown period, however long that maybe, then we could see a fairly quick rebound”.
Besides, Bernanke also acknowledged the existing Fed Chairman Jerome Powell for taking quick decisions. He said:
“I think the Fed has been extremely proactive, and. Jay Powell and his team have been working really hard and gotten ahead of this. They can set up a whole bunch of diverse programs that will help us keep the economy functioning during this shutdown period.”
It is too early to say if the markets will recover from these levels. Actually, most of it depends on how fast we can get away with the сoronavirus spread and bring businesses to normalcy.
Bhushan is a FinTech enthusiast and holds a good flair in understanding financial markets. His interest in economics and finance draw his attention towards the new emerging Blockchain Technology and Cryptocurrency markets. He is continuously in a learning process and keeps himself motivated by sharing his acquired knowledge. In free time he reads thriller fictions novels and sometimes explore his culinary skills.
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