The Federal Reserve has pulled out its bazooka to try to save the economy (and yes, the stock market, even if Jay Powell doesn’t want to concede that) from the black swan event that is the coronavirus outbreak.
Now President Trump and leading Democrats must uncork the howitzer. Some market watchers say investors want to see a $1 trillion fiscal relief plan before wading back into a blown up stock market. That would be sizably above what the Trump administration is reportedly looking for in the ballpark of $850 billion.
It would also usurp the $700 billion bailout plan that helped stabilize markets and the economy during the Great Recession.
The market would react “very positive” to a $1 trillion relief plan, said EvercoreISI strategist Dennis Debusschere on Yahoo Finance’s The First Trade. “That would be significant and the market would react very positively to that. My initial pushback from clients is that there is significant doubt that would get done just because of the politics of everything.”
The Dow Jones Industrial Average soared more than 1,000 points on Tuesday on hopes a fiscal bailout plan was nearing. But make no mistake, the market is extremely jittery especially after seeing close to 3,000 points wiped off the Dow on Monday. Businesses such as Nordstrom have retracted their full year outlooks as malls become barren wastelands with stores closing down to precent coronavirus outbreaks. Airlines will likely get a bailout from the government as global travel comes to a screeching halt.
For policymakers, the best they can hope for right now is that a relief plan tempers a recession in the middle of the year. And then, the economy kicks back into gear in the fall with the coronavirus outbreak potentially beyond its peak.
Until then, investors are hanging on every headline and are more willing to sell first and look to come back later.