Washington Finally Gets It
Author: Greg Valliere
March 17, 2020
IT TOOK LONG ENOUGH, but Washington finally grasped yesterday that a life-altering crisis requires an unprecedented response. Some experts like Dr. Anthony Fauci knew that for weeks, but now this city’s establishment — President Trump, Congress, the Federal Reserve — are now on board.
FISCAL STIMULUS IS COMING: Two major bills are moving in Congress. The first, a House measure passed last Friday to aid victims — with paid leave, more generous employment benefits, etc. — should pass today or tomorrow in the Senate, after some tinkering to protect small business owners.
THEN COMES A MASSIVE STIMULUS BILL, costing several hundred billion dollars. This could take a week or longer, because the House and Senate have different views on bailouts and tax cuts, but we think it could be enacted by the end of March. There will be two key features:
Aid to ailing industries: The airline industry in particular will get assistance, worth at least $30 billion, mostly in the form of tax relief and loans, the hotel industry also will get aid, as will hospitals, but the main priority is to provide immediate stimulus for small businesses, which face ruin if a recession lasts well into summer.
Aid to individuals: Trump and his advisers still favor a payroll tax cut, which has received a lukewarm reception on Capitol Hill. Most lawmakers want an immediate cash infusion, not one that will come incrementally in paychecks; Mitt Romney has support for his idea of immediate $1,000 checks. A compromise could be a lump-sum check to cover payroll taxes paid through this spring, then a tax reduction for the rest of the year.
MORE FROM THE FED: The massive injection of liquidity from the Fed yesterday was accompanied by a crucial pledge from Jerome Powell that he is prepared to do more if necessary. The best piece this morning on the Fed’s tool kit is in the Wall Street Journal, by Nick Timiraos and Julia-Ambra Verlaine; their article makes it clear that there’s more the Fed can do.
A LITTLE OPTIMISM: In talking with strategists and traders at our parent company, AGF Investments, we come away with a major positive: the banks are extremely well-capitalized; the Dodd-Frank bill and an activist Fed will ensure that there won’t be a liquidity crisis. This is not like 2008, at least from a bank standpoint.
SO IT’S SINKING IN: An ugly recession is virtually certain, and this crisis may last into the summer. Donald Trump finally gets it, so we’ll try to lay off him. No, he doesn’t get a “10” on a scale of 1 to 10, as he said yesterday — but even Trump now realizes that desperate times require desperate measures.
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), Highstreet Asset Management Inc. (Highstreet), AGF Investments America Inc. (AGFA), AGF Asset Management (Asia) Limited (AGF AM Asia) and AGF International Advisors Company Limited (AGFIA). AGFA is a registered advisor in the U.S. AGFI and Highstreet are registered as portfolio managers across Canadian securities commissions. AGFIA is regulated by the Central Bank of Ireland and registered with the Australian Securities & Investments Commission. AGF AM Asia is registered as a portfolio manager in Singapore. 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.
© 2020 AGF Management Limited. All rights reserved.