World markets back Trump’s plan

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March 25 2020
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Wall Street has backed Trump’s stimulus package and plans to take the clamps off the economy by letting people out of isolation, leading to the largest one day rally since 1933, an industry expert has said.

The US President will take a different approach to Australia and the United Kingdom, opening up it’s country despite the risks of the COVID-19 pandemic.

“I give it two weeks,” Mr Trump said earlier in the town hall, suggesting he was ready to phase out his 15-day self-isolating guidelines when they expire. “I guess by Monday or Tuesday, it’s about two weeks. We will assess at that time and give it more time if we need a little more time. We have to open this country up,” Mr Trump told media in the US.

According to Franklin Templeton’s chief investment officer, Dr Sonal Desai, supporting the US economy through the black swan event of the coronavirus will allow the US to have a strong recovery in the second half of the year, provided the shutdown is short and a major stimulus is announced in the next few days.

“The fiscal support package currently in Congress amounts to about $2 trillion, or 10 per cent of US gross domestic product.”

“In synergy with the Fed’s array of measures, it would allow a large share of businesses and households to weather the storm. The damage to the economy – and to the livelihood of countless individuals – will still be substantial, but this combination of fiscal and monetary policy would allow the majority of businesses to avoid bankruptcy and to rehire/pay their workers as the emergency ends,” Dr Desai said.

A combined “shock and awe” fiscal and monetary support is also needed to reassure financial markets while we still face significant uncertainty on the duration of the crisis. Without the fiscal component, monetary policy cannot do it on its own – and investors clearly realise this.

“The Federal Reserve has raised its response to the coronavirus crisis to a whole new level, announcing open-ended quantitative easing as well as purchases of short-dated investment-grade corporate debt and exchange-traded funds, measures that had not been adopted even at the height of the global financial crisis just over a decade ago,” Dr Desai said.

The news out of the US was positive for Australia’s S&P 200, which was up 3.7 per cent at lunch time.

Japan’s Nikkei 225 was up nearly 6 per cent and the United Kingdom’s FTSE 250 was up 8.3 per cent on the close.

About the author

Cameron is a journalist for Momentum Media's nestegg and Smart Property Investment. He enjoys giving Aussies practical financial tips and tricks to help grow their wealth and achieve financial independence. As a self-confessed finance nerd, Cameron enjoys chatting with industry experts and commentators to leverage their insights to grow your portfolio.

About the author

Cameron is a journalist for Momentum Media's nestegg and Smart Property Investment. He enjoys giving Aussies practical financial tips and tricks to help grow their wealth and achieve financial independence. As a self-confessed finance nerd, Cameron enjoys chatting with industry experts and commentators to leverage their insights to grow your portfolio.

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