Markets Boosted as US Senate Agree Stimulus Package

By Eliman Dambell

Tuesday was another day of volatility in the markets. However the news that the White House and the US Senate have agreed to the Stimulus bill has helped boost market confidence. The bill sees a projected package of $2 trillion made available in the United States efforts to overcome the crisis caused by the Coronavirus.

As a result of this momentous agreement, several US markets rallied.This started with the DowJones, which had its biggest one day gain since 1933, with markets rallying close to over 2100 points. The S&P500 also saw gains, moving from 2244 to a day high of 2427 as a result of the news. Although we have seen this rally the question still remains, will this be enough to help markets find some normality?

Will this stimulus ease market concerns?

This move comes as New York state is fast becoming the epicenter of the Coronavirus, now recording close to over 25,000 cases, with 210 reported deaths thus far. This means New York alone has more cases than the whole of the United Kingdom which so far has 8,000 confirmed cases. As a whole the United States has 55,000 cases. With the top contributors in respect to states outside of New York, as follows. New Jersey with 3700 cases. California with 2600 cases. Washington with 2500 and Illinois and Michigan with 1500 confirmed cases.These have all come, before the “peak” many reports suggest is still on it’s way and may be 10 – 14 days away. 

 

So although fiscally the US have shown firm commitment to help all those impacted by this from an economic perspective, many believe that not much has been done in other areas to stem the bleeding. The proverbially bleeding has seen 800 deaths reported thus many, and should this number as well as the number of those infected rise, we may see markets start to panic once more, as it may be clear that no dollar amount would be sufficient to prevent human casualty.

 

Market reaction

Now for the remainder of the week many will be asking themselves the question, what next? Will the bull market of Tuesday transcend to the remainder of the week, or will bearish pressure currently in the market create further short selling opportunities as seen in the chart below?

 As currently constructed it seems as though the markets have been trying to consolidate. US indices have shown historically they could be a solid long term bet. So with markets dropping in value, many have merely looked at this as an opportunity. The opportunity to enter at a lower price, or for those who already have skin in the game to double down on investments, to bolster their holdings.

Irrespective of this, the next few days and weeks will be key in seeing how much the US has actually suffered from this crisis. Current projections show that infection rates are doubling every 3 days. Meaning we could be at close to over 100,000 cases of COVID-19 by the end of the week, in the US. 

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