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The fiscal stimulus package came amid the constantly dropping markets over the rise in the coronavirus spread. The Trump government announced direct payments and tax reliefs to individuals and small businesses. Dow Jones moved up on this news.
The coronavirus outbreak has taken the entire global economy on a toss. Businesses across the world are facing the heat of this slowdown as the situation goes from bad to worse. The Dow Jones Industrial Average has been tossing like a crazy ball on the market with volatility hitting new highs. On Tuesday, the Dow Jones climbed 1000 points moving above 21,000 levels after the Trump administration announced stimulus measures.
As a cushion to the tumbling economy, White House announced $1 trillion and above fiscal stimulus package. The U.S. Treasury Secretary Steven Mnuchin briefed the media saying the government is considering making direct payments to Americans. Besides, the government has also planned for major tax relief for individuals and small businesses.
Mnuchin said that small corporations will defer tax payments for up to $10 million while individuals can defer them up to $1 million in payments to the IRS. Mnuchin mentioned that President Trump has authorized this deferral plan to the tune of $300 billion in payments to the IRS as a part of the stimulus package.
Besides, the Federal Reserve has also announced measures to help companies who are struggling to get short-term funding. Businesses have been facing some demand crisis at this point in the market, whereas Wall Street eagerly waits for the central bank to intervene similarly to the times of the 2008 financial crisis.
Upcoming Recession or Market Pullback: Will $1T Stimulus by Trump Help?
Over the last two weeks, the market has tailspin downwards over the sudden surge in COVID-19 cases. Data from Johns Hopkins University, says that over 5700 cases have been confirmed comprising 90 deaths. President Trump said that the situation can further extend up to August 2020.
Well, this has caused many to think that we’re slowly approaching an economic recession ahead. On Monday, Dow Jones collapsed by 3000 points going close to $20,000 levels. At Monday’s closing, Dow Jones was 31% down from its 2020-peak levels just under a month’s time. Peter Cardillo, the chief market economist at Spartan Capital Securities, said:
“Yesterday was a real washout. I think we’ll have a recession. It’s just a question of how steep it will be.”
But Tuesday’s announcement of the stimulus package has made some analysts positive. Art Hogan, the chief market strategist at National Securities, said:
“We know there’s going to be monetary policy. We know there’s going to be fiscal policy and we’re hearing more about that. That’s two legs of the stool. The federal health care policy response, that’s another one. I still think the information on that needs to get better.”
Hogan further added: “We’ve done a lot of recalibration of equity values, all based on an assumption of how much economic damage is done, but we won’t know exactly how much damage for a period of time. One thing I’m sure of is the markets will have found a bottom long before the news starts to get better.”
Tuesday’s fiscal stimulus gave a major boost to the Treasury yields with the 10-year Treasury rate going back above 1%.