As the calendar shifts to a new season, markets looked much the way they did a week ago. Could spring bring hope?
Fiscal Stimulus
The US government approved additional stimulus last week to combat the impacts COVID-19 will likely have on workers. They increased paid sick time requirements, unemployment benefits, and family leave time. They are currently working on a bill with a much heftier price tag. Estimates put it between $1T and $1.6T in total cost. The bill includes checks to household, bailout provisions for the airline industry, and fee free lending to small businesses. The hopes are to have checks in the mail by early April, but that is likely ambitious.
Monetary Stimulus
Merely a week after doing an unplanned slash of rates by .5%, the Federal Reserve Bank (FRB) slashed rates an additional 1% Sunday. They would have likely done more, but that rate cut brought them to 0%. They also initiated what will now be Quantitative Easing 4. A bond buying program consisting of $700B to help provide lower rates and stimulate the economy. They re-established the short-term lending facilities used to ensure liquidity under the pressures of the current economic environment. These were last used during the financial crisis. The lessons learned from the crisis will likely go a long way to making these market shocks shorter lived.
Conclusion
Markets have moved into bear territory at a breakneck speed. It seems that government restrictions have become stricter by the day. The shuttering of businesses around the nation have caused a breakdown of the supply chain and a strain on people’s abilities to pay bills. Unemployment numbers rose last week, but likely by only a fraction of the increase expected next week. The efforts of the FRB and government will not cure COVID-19. They will, however, make our stay at these market lows short lived when hope does reappear.
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