Wall Street analysts say the chances of Congress approving a federal stimulus package are “effectively zero” now that the conversation has shifted to filling the late Justice Ruth Bader Ginsburg’s Supreme Court seat.
“With the passing of Justice Ginsburg, the level of rhetorical heat has increased, if that seemed even possible,” Greg Staples, head of fixed income for the Americas at DWS Group, told Axios. “What little time is left on the Congressional calendar … will be focused on Trump’s Supreme Court nominee. We now view the chances of a new stimulus package prior to the election to be effectively zero.”
According to Mark Hackett, chief of investment research at Nationwide, Wall Street analysts had factored Congressional spending into their economic forecasts for months but have now been forced to readjust their expectations.
“Markets had embedded substantial optimism in early September, with the valuation of the S&P 500 at the highest level in 20 years and sentiment at extreme highs, setting the stage for a natural period of consolidation,” he said. “Investors are now struggling to find a positive catalyst, as the prospect for fiscal stimulus fades, economic data begin to reflect rising coronavirus cases and earnings season remains a month away.”
Economic concerns have been reawakened after the Dow Jones Industrial Average dropped more than 500 points yesterday.
“Monday’s losses were broad,” reported The Wall Street Journal. “Ten of the 11 sectors in the S&P 500 dropped, led by economically sensitive groups like materials and industrials, which both fell 3.4%. The technology sector, which has driven much of the stock market’s remarkable rebound since March, was the only group to finish the day in the green, up 0.8%.”
“The odds of us getting a stimulus package before the election are probably as close to zero as we are going to get,” Jim Tierney, chief investment officer for concentrated U.S. growth at AllianceBernstein, told the news outlet. “The stocks that needed stimulus are getting hit hard today.”
Lawmakers are no closer to approving a stimulus package than they were in July when a $600 unemployment boost expired. Other provisions in the CARES Act, the financial relief package that passed Congress six months ago, are due to expire by the end of 2020.