Coronavirus stimulus checks: Package to result in ‘much bigger bounce’ in stock market

Coronavirus stimulus checks: Package to result in ‘much bigger bounce’ in stock market
OrnaW / Pixabay

There is a growing demand for a coronavirus relief package, but Democrats and Republicans have yet to reach a deal. Experts are of the opinion that the coronavirus relief package and stimulus checks would give the much-needed boost to several industries, as well as the stock market.

Get The Full Seth Klarman Series in PDF

Get the entire 10-part series on Seth Klarman in PDF. Save it to your desktop, read it on your tablet, or email to your colleagues.

Q2 2020 hedge fund letters, conferences and more

Coronavirus stimulus checks to boost stock market

Dan Niles, Satori Fund founder and portfolio manager, believes that another stimulus package could provide a significant boost to the stock market, according to Yahoo Finance. As per Niles, the stock market could witness a downturn and there are several reasons for that, such as the coronavirus pandemic, high price point of some stocks, and the upcoming flu season.

This Value Fund Generated Significant Alpha In 2021

InvestGrizzlyRock Value Partners was up 34.54% net for 2021. The fund marked 10 years since its inception with a 198% net return, resulting in an annual return of 11.5%. GrizzlyRock enjoyed 14.8% long alpha against the S&P 500 and 26.9% against the Russell 2000. Q4 2021 hedge fund letters, conferences and more The fund's short Read More

Thus, Niles says “you can make a real good case that the market should be down a lot even from here,” adding, “But then that gets us to the upside potential, which is the S&P is flat year to date because you had 30% of US GDP brought in as stimulus, both monetary and fiscal."

If Congress comes up with another stimulus package, then as per Niles, there could easily be “a nice 5%-plus move in the markets,” adding there could probably be a “much bigger bounce."

Previously, CNBC’s Jim Cramer also suggested that another relief package would be good for investors. “If we get a stimulus package and you’re out of the market, you will feel awful,” Cramer said a couple of weeks back. Cramer also warned that in the absence of an additional relief package, the stock market rally, since hitting bottom in March, could be at risk.

Will there be another relief package?

This boost in the stock market that Niles and Cramer are talking about, is dependent on if Congress could come up with another coronavirus relief package and stimulus checks. Another package, however, looks unlikely for now.

Despite negotiations over the last couple of months, Republicans and Democrats have not been able to reach a consensus. However, last week both sides have given hints on resuming negotiations on the next relief package.

There has been differences over the total cost of the package. Democrats want a relief package costing more than $2 trillion, while Republicans are not willing to spend more than a trillion dollars.

Republicans initially came up with the HEALS Act costing over $1 trillion, but earlier this month, they came up with another package costing about $500 billion. Democrats also initially came up with a proposal costing over $3 trillion, but after the negotiations started, House Speaker Nancy Pelosi brought it down to $2.2 trillion.

Last week, there were reports that Democrats are also working on a new proposal that would cost about $2.4 trillion. Their package would include unemployment aid, the Paycheck Protection Program, and stimulus checks.

No posts to display