The stock market is actually functioning on quite a high note this week- something that has been made possible due to the ongoing negotiations for a stimulus deal. The markets have been calm and focused as they are getting encouraging updates of President Donald Trump’s health. Interestingly, the Presidential elections are just a month from now- and public favor is swinging tremendously towards Joe Biden- investors believe that there might even be a possibility of a non-contested outcome.
What Does Miller Tabak and co. think about the entire situation with the stimulus deal and its effect on the stock market?
Nancy Pelosi, the House Speaker, and Steve Mnuchin, the Treasury Secretary have been in constant consultation with Jerome Powell, the Federal Reserve Chair regarding the stimulus deal. As reported by Politico, they might actually be gaining more ground than one could think. Miller Tabak & Co’s head strategist Matt Maley has mentioned that if there is a near-term bounce resulting from some fiscal plan, it could very well be short-lived. He further mentioned that with the President of the United States of America contracting coronavirus, the two parties would actually be more willing to give in to a stimulus deal- considering they can easily concede some ground without losing their dignity.
However, he came with several warnings as well. He believes that a pop created by this deal could very well be brief without any far-reaching consequences. He said that while an agreement on the new fiscal plan was probably on the move, it might not actually help the stock market in any sustainable procedure. Since the market is heavily overvalued, and the very combination of a picture of a weakening employment structure along with the virus’s second wave would probably not bode well for most of the P/E ratio- as the economy proceeds further.
Strategist Warns that All Might Not be Well in the Stock market even if the stimulus deal comes through
More importantly, history has forever shown us that a stimulus deal has a much larger role to play as a catalyst for a rally that is extremely sustained and strong. But this usually comes into play when the stock market is on its last legs- not where there is already a rally in place. This came after he noticed that the S&P 500 was almost more than half of how low it was in March. Finally, he added that there would be another ‘down-leg’ for the correction in the month of September that would probably arrive in October.
But yet another strategist mentioned to Miller Tabak & Co, that there was one important factor- that of chip stocks- which would definitely hint if they are going wrong. Chip stocks have always been a very important part of the leadership group in the entire stock market- so the action in the upcoming days will be incredibly important.
A stimulus deal will actually be very important for the stock market, and the economy, for the considerably large unemployment structure would definitely rise down- leaving a brand new type of politics, something that would be about solidarity.