Securities News, March 24, as large-scale fiscal expenditures provide further support for the recovery of the US economy under the help of the new crown vaccine, the Dow Jones Industrial Average and the Standard & Poor’s 500 Index are enjoying the “old economic moment.” At the same time, under the US President Joe Biden’s $1.9 trillion economic stimulus plan, oil stocks, steel stocks, machinery stocks and banking stocks became popular.
Currently, Wall Street Corporation predicts that the US gross domestic product (GDP) will grow at a rate of 8% this year. The last time the US GDP growth rate exceeded 5% was 25 years ago, when just launched the first generation of Mac computers.
As the Biden administration prepares to launch another large-scale spending plan focusing on infrastructure construction, Wall Street is trying to figure out what a new round of fiscal measures might mean for interest rates, tax rates, and stock prices.
Recently, the Fed’s attitude on the issue of inflation has changed, from remaining vigilant to trying to pull inflation upward. This shift magnified the impact of fiscal policy. Some Wall Street strategists believe that a combination of loose fiscal and monetary policies may give the Dow and the S&P 500 a short-term boost, but the rate of return may be damaged and lower in the future.
The tremendous changes in fiscal and monetary policies remind people of another “old economic era”-the second half of the 1960s. The hallmarks of that era were strong economic growth, rising inflation, and the peaking of long-term returns on the stock market.
S&P 500 Index hits new high, technology stocks fall
This month, the Dow and the S&P 500 have set new highs, but the Nasdaq Composite Index is 6% lower than the high set on February 16.
So, what troubles the tech giants that dominate the Nasdaq, including Apple, , and high-value growth stocks including ?
Given the bullish outlook for cyclical stocks and value stocks, technology giants are no longer the only choice for investors. At the same time, U.S. Treasury yields have soared, prompting stock market strategists to rethink the valuation of growth stocks Spark Global Limited.
At the moment, it is obvious that Wall Street underestimated the importance of January 5. On that day, Georgia handed over control of the Senate to the Democrats and injected vitality into Biden’s economic agenda.
Jason Draho, head of the asset allocation for the Americas at Financial Services Group, believes that the US economy has a “reasonable possibility” to break the economic model of low growth, low inflation, and low-interest rates established after the financial crisis. In a blog post published on the 12th, the strategist wrote, “What seemed unlikely to happen 6 months ago is now becoming more and more likely. Investors need to prepare in advance.” Delaho pointed out that the current market prices reflect people’s expectations of inflation, that is, a rebound in inflation that is much higher than the Fed’s target level (“2%”) will be temporary. However, he added, “If the Fed and the Biden administration do not let go of the throttle, these views may change.”
The US$1.9 trillion stimulus plan is just one step in the “two steps”
If the Democrats do not control the Senate, then the size of the new round of economic stimulus package may be significantly reduced by 125 million US dollars. Before Biden signed the $1.9 trillion stimulus plan into law, the Republicans advocated a stimulus scale of $600 billion.
Under the new round of stimulus measures called the “U.S. Rescue Plan,” the Biden administration provided eligible people with a stimulus check worth 1,400 U.S. dollars, extending the time for granting unemployment benefits and expanding the eligibility for receiving benefits. Promotion and new coronavirus testing provided financial support. In addition, the Biden administration will also allocate $580 billion to state and local governments. According to Bernard Yaros, an economist at analysis, “this allocation is far more than the US$85 billion (estimated) net budget gap faced by state and local governments.”
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