Another big week. Over the weekend, the coronavirus stimulus bill failed to pass in the Senate and the news sent futures to “limit down.” But before the market opened on Monday morning, the Fed announced limitless quantitate easing, which gave markets a little room to breathe while Congress continued working toward a resolution. Several states ordered “stay at home” ordinances, shutting down more and more of the US economy. But Congress finally passed a the much-awaited $2t coronavirus relief bill and stocks surged 18% over three days through Thursday.
Moral of the story: The stimulus package contains carve-outs targeting individuals, small businesses, unemployment, and hospitals, to name a few. The full economic benefit, however, is yet to be seen because this massive bail-out will come at a price (eventually). But for now, as expected, this stimulus package has brought stocks back from the plunging depths of despair though I expect continued choppy waters for at least a few more days as the country continues to fight the mounting cases in the US.
The big number for this week- jobless claims. The number of Americans who applied for unemployment benefits last week soared to 3.28 million as entire parts of the US economy came to a halt. The real kicker is that many Americans weren’t able to file claims because some state computers got overloaded and workers classified as contractors (like Uber drivers) aren’t even counted in this number. This number is actually understating the devastation to employment right now. To put this into context, the weekly jobless claims in the past recessions didn’t even hit 1m, so this is a yuge deal.
Moral of the story: This is just the beginning. As other states issue shutdowns of nonessential businesses, we’re going to see unemployment claims come through in waves. Some economists are predicting unemployment could reach as high as 20% (we’ve been running in the low 3% range for a while before the rona happened), which is close to where we were during the Great Depression in the 30s. The weirdest part is that stocks continued to rise after this report, which is either complete insanity or an indication of how oversold the market already was. Either way, as I said, choppy waters still ahead I think.