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The stock market may be too optimistic about stimulus chances

The stock market may be too optimistic about stimulus chances

  • Stocks surged after President Trump suggested stimulus could be adopted piecemeal, including airline aid, since there’s no agreement on a larger sweeping package.
  • Stocks had tanked Tuesday when Trump tweeted that he was ending talks between his administration and Democrats.
  • But strategists said investors may be too hopeful that Congress can come together on a spending plan before the election.



a man wearing a suit and tie talking on a cell phone: Traders work on the floor of the New York Stock Exchange, March 20, 2020.


© Provided by CNBC
Traders work on the floor of the New York Stock Exchange, March 20, 2020.

A fiscal stimulus package is the one thing that could put the stock market on an upward trajectory into the election, but some strategists say the odds of that happening are still rather low.

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President Donald Trump, within hours Tuesday, both dashed hopes for a stimulus package by calling off administration talks with Democrats, and then rekindled them by tweeting about aid to airlines and other  smaller targeted packages.

The Dow was up 1.8% Wednesday after Trump triggered a sharp sell-off Tuesday. But that has not changed the dynamic for markets, and stocks are still expected to trade in a choppy, volatile fashion until the outcome of the election is clear.

“I’m surprised that everybody is all bulled up about it again,” John Briggs, head of strategy at NatWest Markets.

Some see the disagreement over what’s in the package as insurmountable in the short-term, and they do not expect a compromise in Congress until after the election. One reason is Senate Republicans, who have sought a much smaller package than even the White House, have the Supreme Court nomination on their calendar and will be occupied.

Democrats have sought a $2.2 trillion package that would provide funds for individuals, help businesses and provide aid to state and local governments. The White House has said it would agree to $1.6 trillion

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