Trump finally got with the picture and announced a major spending package to support businesses and households as they cope with the financial fall-out from measures taken to restrict the spread of COVID-19.
Trump’s administration is pushing through an $850 billion stimulus package while also considering helicopter money (see WTF) to the value of $1,000 per household.
The Federal Reserve (US central bank) also kicked off its bond-buying programme which is designed to inject billions of new dollars into the system.
All of these measures cannot reduce the spread of the virus, but they are designed to help folk cope with the lock-down process.
Investors were left pondering what the right value is for stocks and bonds. Measures are being taken to support companies and help some of them stave off potential bankruptcy. But the virus has yet to peak in the US and Europe, both of which appear to be the current centres (never “epicentres”, which is the point ABOVE the central cause of something) of contagion.
Prices are, therefore, “whipsawing” as they say on Wall Street. Flick the end of a long metal saw, and watch it ping back and forth really quickly. Or, do the thing with a ruler on the desk that makes that fantastic noise and really irritates Mr. Kent who sends you out of the classroom until you behave, hypothetically speaking of course.
In other words, stock prices are swinging wildly between massive gains and losses. Yesterday ended up providing gains in the US with the Dow Jones Industrial Average, S&P 500 and Nasdaq Composite adding between 5.2% and 6.2% on the day. These are massive moves, but have become everyday occurrences over recent weeks.
The effects are so broad that it’s a bit pointless giving too many stock specifics. But travel and leisure companies (cruise, restaurant, airlines) are suffering the most while pharmaceutical companies (potential producers of a cure or vaccine for the virus) are doing less badly, sometimes quite well.
Benchmark Treasury (US government bonds) yields also partially recovered as the stimulus package was unveiled (reducing demand for lower-risk rated investments such as bonds, pushing the prices down and yields up). The 10-year Treasury yield had dropped to an all-time low of 0.541% a few days ago. It has juggled its way back up to 1.02% now. But even this is a world away from the 2.5% or higher that it was last summer.
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