A 4th fiscal deal remains far off according to Nancy Pelosi who spoke on Bloomberg TV and said that she is sticking to her demand for at least $2.2 trillion in the next covid relief bill, clarifying that "state and local" is critical and adding that "something is not necessarily better than nothing" on aid, an argument which both millions of people and markets may have an argument with.
And speaking of the latter, stocks legged lower, and after staging a modest rebound in the past hour, dropped back under the 50DMA and to session lows following Pelosi's comments, while QQQs continuing to slide below the 270 critical level.
Some other headlines from the interview:
- *PELOSI SAYS STIMULUS NEEDS ARE ONLY GROWING AMID PANDEMIC
- *PELOSI SAYS WORKING OUT DETAILS ON STOPGAP FUNDING BILL
- *PELOSI: HOPE TO HAVE STOPGAP TODAY, BRING TO FLOOR NEXT WEEK
As a reminder, two days ago Trump made it clear that the White House is now willing to settle at the $1.5 trillion package which was introduced by the Problem Solver caucas, urging Senate republicans to raise their $500BN skinny deal, although Larry Kudlow yesterday said GOPs have sought to cap aid package at $1 trillion. The reason: republicans believe more stimulus would bail out poorly run democratic states, and the delta between the latest GOP bid of $1.5 trillion and the Democratic ask of $2.2 trillion - which would go to fund various states - remains a key sticking point.
In short, the US remains far from any imminent fourth stimulus deal, something which Goldman noted earlier when it said that "the prospects for further fiscal stimulus have dimmed further, as another week has gone by without any progress. At this point, a major stimulus package before the election looks like a long shot and we expect Congress to leave at the end of September without extending the extra unemployment insurance payment, approving another round of stimulus payments, or providing additional support to small businesses or state and local governments."
As a result of this downbeat admission that it was wrong - again - Goldman conceds that the 9adverse) outcome of the fiscal debate is likely to mean (downward) changes to its forecast for Q4:
Our current forecast assumes a $1 trillion package, including partial extension of the extra unemployment benefit and additional PPP loans. Failure to pass any additional fiscal measures would likely lead us to downgrade our growth estimates for Q4. By contrast, enactment of the sort of package that President Trump or Speaker Pelosi have both endorsed would likely lead us to upgrade our view for Q4.
That said, Goldman concludes that "there is still a fairly good chance for additional stimulus, eventually." The catalyst: "If Democrats win the White House and both chambers of Congress, we expect them to pass a large fiscal stimulus package, similar to the $2.2 trillion proposal Speaker Pelosi has endorsed, as one of the first orders of business in 2021. This would be in addition to Vice President Biden’s longer-term fiscal expansion plans. Some additional fiscal relief would also be possible under divided government, though the magnitude would likely be much smaller."
In short, while a stimulus bill may be delayed - at least until the election - it is only a matter of time before it passes, with the final bill likely to be far greater than the $2.2 trillion some have tentatively priced in, just as Charlie McElligott noted earlier today.