One of the big events of the week in the US is going to be on Thursday, when President-elect Joe Biden will be announcing his plan for fiscal stimulus ready for when he takes office on the 20th.
In order to prevent the economy from collapsing this year, and referencing a Moody’s study that more stimulus is required to keep the economic recovery going, Biden has said that “the price tag will be high”.
Although he hasn’t given a figure, reports suggest it’s likely to be in the trillions, with most expectations around the 1 to 2 trillion mark. But given his comments, I wouldn’t be surprised if it even came higher than March’s initial package which was worth $2 trillion.
If it does exceed March’s figure, it would be the new biggest fiscal package in US history.
There are also good signs that stimulus could land very quickly after Biden takes office. With Democrats holding both the house and the senate, it shouldn’t see the same delays as the fiscal package late last year which saw multiple delays lasting months. However, since the Senate is still a close divide, nothings a given.
One of the main things that could delay this stimulus, is the impeachment process, as this would take priority. That’s why Nancy Pelosi was considering withholding it. However, if there are delays, parts of the last bill will still run until mid-March.
Following on from last month's job report, which showed 140,000 jobs were lost in December, therefore reversing the trend of a growing labour market, a particular focus for many will be what’s available for those out of work and, of course, the stimulus cheques for individuals.
If Biden announces anything that seems to be above the current upper end of expectations of around $2 trillion, we’ll probably see another rise in US equities, but other US markets have been a bit more nuanced. It’s not a regular situation so normal relationships don’t necessarily apply.