Wall Street is moving quickly to crystalize around the view that if President Trump doesn’t sign a new $900 billion bipartisan COVID-19 stimulus bill, then investors will get torched.
EvercoreISI strategist Dennis DeBusschere thinks a “tailspin” in markets and the economy will emerge if Trump doesn’t whip out his pen and sign on the dotted line immediately. Yet, that uncertainty is where things stand right now after Trump surprised many in D.C. with his take on the stimulus bill hammered out by bickering lawmakers in Congress this week.
In a video posted on Twitter Tuesday evening (below), Trump said the relief package “really is disgraceful” and includes “wasteful” items. “It’s called the Covid relief bill, but it has almost nothing to do with Covid,” Trump said in a video now viewed 21.3 million times. Trump called for stimulus checks of $2,000 for individuals and $4,000 for households.
Under the proposed legislation brought to Trump’s desk, single people earning up to $75,000 will receive a check of $600. Married couples bringing in $150,000 will get a check of $1,200. Both amounts are half of what was paid out directly to folks in the Coronavirus Aid, Relief, and Economic Security (CARES) Act.
The bill also includes $1.4 trillion in funding to keep the government open.
Stocks surprisingly shrugged off Trump’s bluster. The Dow Jones Industrial Average, S&P 500 and Nasdaq were all solidly in the green by afternoon trading Wednesday.
But investors shouldn’t be lulled into complacency on the stimulus issue. Absent Trump’s signature, the government could risk another shutdown and households would continue to grapple with the financial fallout of the COVID-19 pandemic. That would arguably create the condition for the “tailspin” suggested by EvercoreISI’s DeBusschere.
— Donald J. Trump (@realDonaldTrump) December 23, 2020
“This is one of the more interesting things I have seen in my career. We would be going into recession by choice. This is something that the political actors in Washington have the power to prevent. And they should act to present it,” RSM US LLP Chief economist Joe Brusuelas told Yahoo Finance Live. “If they don’t and this just continues well into January and nothing gets done, we are likely to see a double-dip recession. That still create conditions that will delay recovery and create an expansion that’s weaker than it otherwise has to be.”
By most recent economic measures, relief from the government is needed now more than ever as the pandemic rages on and wreaks havoc.
New homes sales tanked 11% in November, the Census Bureau reported Wednesday. The Commerce Department reported Wednesday consumer spending fell in November for the first time since April. On Tuesday, the Conference Board said its closely watched consumer confidence index dropped to 88.6 in December from a downwardly revised 92.9% in November.
“This is not stimulus,” Brusuelas argues. “This is direct aid to the American people who are in need of it during this holiday season.”
Dust off your pen, Trump.
Brian Sozzi is an editor-at-large and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.
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