The Federal Reserve has provided the footing for the stock market rally since March. Hope for another round of Congressional stimulus spending has built up investor confidence.
That optimism meets political reality this week.
The Senate is expected to begin debate on a new round of pandemic stimulus. Four months into the pandemic, political lines have hardened compared to the emergency bipartisanship that fueled the first four stimulus efforts.
The federal government’s $600 a week boost to unemployment checks is due to end at the end of the month. Stimulus checks have been sent out and mostly spent. There still is money earmarked for Paycheck Protection Program loans. And hundreds of millions of dollars have been sent to state and local governments.
While the form of the next stimulus will be similar, the substance may be different.
Stimulus payments and boosted unemployment checks are likely to be part of any new effort.
The House already passed a Democratic plan to send out a second round of $1,200 checks to those who qualified for the first round. However, Senate Republican Leader Mitch McConnell has mentioned Americans earning less than $40,000 as the hardest hit by the economic consequences of COVID-19. In the first round, Americans earning $75,000 or less qualified for the full stimulus check.
Expect debate over how much to boost unemployment benefits. The current $600 payment has helped bridge the gap left by low paying state unemployment programs. However, there has been a growing chorus of concerns that the federal portion may be paying some workers more than if they would return to jobs. The Federal Reserve’s latest roundup of regional economies found “reports on the disincentive to work from receiving unemployment insurance benefits were mixed” in the southeastern U.S.
The details of any more stimulus efforts are important. So is the political process that achieves a plan. But what investors are convinced of is that there will be more of the same.
Financial journalist Tom Hudson hosts “The Sunshine Economy” on WLRN-FM in Miami, where he is the vice president of news. He is the former co-anchor and managing editor of “Nightly Business Report” on public television. Follow him on Twitter @HudsonsView.