U.S Stories Over a Cup of Tea; Interplay Between Stimulus and Equity Charters

The developments reportedamidst the coronavirus pandemic across the globe have weighed heavy on the economic as well as social life. Governments worldwideare increasingly burdened to avoidingfurther deteriorationof circumstances.

President’s Warning

US PresidentDonald Trump has warned the world for the upcoming tough two weeks due to the coronavirus pandemic that is rapidly blunting theUS economy as well associal life. Acknowledging the cruel reality, the Presidentwarned about the “painful”two weeks upcomingamidst the rapidly spreadingcovid-19 pandemicin the country.

The President urged the people of the US to follow the guidance and measures announced by the government prescribing the number of people in a gathering, allowing people to work from home and avoiding dining out in public restaurants.

The Presidentfurther emphasised on the criticalneed to follow the measures and restrictions for a period of one monthimposedby the authorities.However, the President also projected 100,000 to 240,000 deaths in the US alone,even after people maintain social distance and abide by the measuresimposed.

Numbers Say it All

In its latest announcement, the Centers for Disease Control and Prevention (CDC)has appealed tothe residents of New York, Connecticut, and New Jersey to hold backfor 14 days effective immediately from 28 March 2020from non-essential domestic travel.

CDC was compelled to urge the residents due to the extensive community transmission of COVID -19 in the above-mentioned areas. However, the essentialactivities like employees of public health professionals, food supply, critical infrastructure industries, financial services, truckingetc. are free from these restrictions.

According to WHO’s Situation Report – 71,there were 140,640 confirmed cases for Covid-19 in the United States alone, and there have been 2,398deaths till date. The number of deaths includes 286 new deaths recorded in a single day. The UN report further mentioned 750,890 confirmed cases and 36,405 deaths globally.

The gravity of the adverse effects of Covid-19 is increasing on a daily basis. News about the US becoming the next epicentre for the coronavirus epidemic isdoing roundsin the market already and have even solidified after the President’salarming message of the likely threat and tragedy in the upcoming weeks.

The US Government has been actively pursuing its citizens to implement measures towards curbing the spread of the Covid-19 ranging from fiscal and economic packages to social distancing measures.

President Trump Calls For Another Stimulus Package

The US PresidentDonald Trumphad recently signed an unprecedented USD 2trillion economic rescue package todeal with the economic crisis cleavingthe US economy. The coronavirus relief bill was signed by the Presidentand was passed in the House on Friday, 27 March after gaining the confidence of the Senate on Wednesday, 25 March 2020.

The package is a combination of grants, deferments and loansand is intended to keep people engaged in their jobs while backing those with no jobs due to the coronavirus pandemic.Businesses are undergoing a hard time in maintaining their recurring expenditures like paying their staff, even after deferring capital expenditures as well as shareholder payments.

TheCongress andPresident Donald Trump’spackage intends to support both, companies,as well as, workers and positions the economy for aless delayedrebound. Additionally, loans are being offered to the businesses in order to keep the employees on payrolls, and the US government also intends tolet off these loans if the companies keep the employees through this phase of the slowdown caused by the pandemic.

With more than USD 300 billion to be paid directly to householdsalong with an additional USD 250 billion for unemployment and delays in tax payments, the support package by the US government boosted the investor sentiments towards the equity market.

DOW Average’s Worst Quarter

Following the announcement, positivity was seen in the market when the S&P 500saw a jump and fared through a good time during the last week. The equity market could not carry the market positivity from last week to the current week citing the intensifying number of coronavirus infected cases in the country.

Moreover, subsequent to1^st April 2020 announcement of the President,the market took a sharp dive withDow Jones futures falling sharply (3.3% vs fair value) along with S&P 500 futures and Nasdaq futures. The S&P 500 futures vanishedmore than 3% whileNasdaq 100 futures also droppedsomewhere around3%.

Moreover, the market posted the worst first quarter on record for the Dow and S&P 500due to the significant drop in the US stock futures facing the shoot in the coronavirus sell-off.

Investors were left in the state of flux with back to back unfavourable events, first being the increase in the number of coronavirus infected cases. Secondly, investor anxiety was fuelled by President Donald Trump’s declaration about the tragic upcoming two weeks.

The markets have been highly responsive to the investor sentiments amidst the Covid-19 pandemic. The prevailing situation of the Covid-19 has left the world in despair while for some, there has been a silver lining in the dark clouds. It shall be interesting to see how the investors react to the appalling news coming from various parts of the world and ways that businesses would seek to tackle things on a better note.