
Are There Any Policy Options to Ease the Crisis?
Author: Greg Valliere
March 9, 2020
THE ENORMITY OF THIS MORNING’S MARKET PLUNGE will undoubtedly prompt renewed debate over whether there are any monetary or fiscal policies that could lessen the growing risk of a recession. The cupboard, unfortunately, looks pretty bare.
THERE’S NOTHING THAT ECONOMIC POLICIES CAN DO to reduce the rate of coronavirus infections; the disease may have to burn itself out, and there are encouraging signs from Wuhan that new cases are falling sharply.
BUT THERE’S UNANIMITY AMONG EXPERTS that new cases and deaths will skyrocket in the U.S. in the coming weeks. This has Washington’s politicians on edge — not just because of the electoral implications, but for personal reasons: President Trump and many of his top aides were exposed to the virus at a conference last week.
DESPITE A DRAMATIC INCREASE IN TESTING KITS that will be available by the end of this week, Trump still faces criticism for confusing messaging; he complained yesterday that the fake media is “trying to do everything to make us look bad,” as if this deadly crisis is all about him.
THE FOCUS THIS MORNING WILL SHIFT TO THE MARKET PANIC, and whether there are policies that could make a difference. We sense that the Federal Reserve is not enthusiastic about another 50 basis point rate cut, since the last one prompted the stock market to sell off. The Fed is running out of ammunition, and might focus instead on easing lending standards.
FISCAL POLICY WILL PLAY A ROLE: Larry Kudlow and Steve Mnuchin, not always on the same page, are looking at a basket of options that almost certainly will be unveiled this week — perhaps today. On the list: bridge loans to ailing companies, temporary tax cuts, temporary lifting of tariffs, aid to people on sick leave, etc. A key issue: will a bailout be required for the airline industry?
WHETHER TARGETED STIMULUS could make much of a difference is debatable;
maybe a package could add a couple of tenths to GDP, but the bigger impact would be psychological. Washington has to show that it’s doing something.
THE BEST HOPE FOR THE ECONOMY is that a massive refinancing boom is imminent, along with a dramatic plunge in gasoline prices. That would be a de facto tax cut, putting money in peoples’ pockets, perhaps stimulating an economic turnaround by summer.
BUT IT’S A LONG WAY between now and summer, and the country needs a wartime president, unafraid to call for sacrifice — and, perhaps, prayer.
The views expressed in this blog are provided as a general source of information based on information available as of the date of publication and should not be considered as personal investment advice or an offer or solicitation to buy and/or sell securities. Speculation or stated believes about future events, such as market or economic conditions, company or security performance, or other projections represent the beliefs of the author and do not necessarily represent the view of AGF, its subsidiaries or any of its affiliated companies, funds or investment strategies. Every effort has been made to ensure accuracy in these commentaries at the time of publication; however, accuracy cannot be guaranteed. Market conditions may change and AGF accepts no responsibility for individual investment decisions arising from the use of or reliance on the information contained herein. Any financial projections are based on the opinions of the author and should not be considered as a forecast. The forward looking statements and opinions may be affected by changing economic circumstances and are subject to a number of uncertainties that may cause actual results to differ materially from those contemplated in the forward looking statements. The information contained in this commentary is designed to provide you with general information related to the political and economic environment in the United States. It is not intended to be comprehensive investment advice applicable to the circumstances of the individual.
AGF Investments is a group of wholly owned subsidiaries of AGF Management Limited, a Canadian reporting issuer. The subsidiaries included in AGF Investments are AGF Investments Inc. (AGFI), AGF Investments America Inc. (AGFA), AGF Investments LLC (AGFUS) and AGF International Advisors Company Limited (AGFIA). AGFA and AGFUS are registered advisors in the U.S. AGFI is a registered as a portfolio manager across Canadian securities commissions. AGFIA is regulated by the Central Bank of Ireland and registered with the Australian Securities & Investments Commission. The subsidiaries that form AGF Investments manage a variety of mandates comprised of equity, fixed income and balanced assets.
About AGF Management Limited
Founded in 1957, AGF Management Limited (AGF) is an independent and globally diverse asset management firm. AGF brings a disciplined approach to delivering excellence in investment management through its fundamental, quantitative, alternative and high-net-worth businesses focused on providing an exceptional client experience. AGF’s suite of investment solutions extends globally to a wide range of clients, from financial advisors and individual investors to institutional investors including pension plans, corporate plans, sovereign wealth funds and endowments and foundations.
For further information, please visit AGF.com.
©2022 AGF Management Limited. All rights reserved.