Broker Check

Mid-Week: Markets Wait for Fiscal Response

| March 18, 2020
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As the response to the coronavirus crisis begins, investment markets continue their violent see-saw, waiting on information.  More information on community spread, recovery rates, & mortality will give us all emotional grounding, while also beginning to provide the framework for a timeline for a return to economic normalcy.  We will leave our homes again. Shops & restaurants will re-open. Travel will resume. The question of when is what matters--and it's all dependent on information.

What is necessary is a Fiscal response from the government, & there appears to be one on the way.  Here's what I'm reading:

Stimulus is Here and More is Coming -- Cetera Investment Management

  • Fed steps into commercial paper market to stabilize corporate short-term lending.

  • Congress and the President’s administration are working on fiscal stimulus package.

Looking through the market turmoil -- BlackRock Investment Institute 

  • A decisive and coordinated policy response should prevent the coronavirus shock from sparking a 2008-style crisis.

  • Government bonds have served their role as portfolio ballast in the risk asset selloff, but this role looks increasingly challenged by low yields.

  • Monetary and fiscal actions to cushion the blow have begun, including the Fed cutting rates to near zero and announcing bond purchases.

As an important aside, the Federal government announced delays to tax payments due for 2019:
  • A three-month reprieve for the payment of taxes normally due April 15th. The deferral of the tax payment is interest and penalty free for 90 days — up to $1 million for an individual and $10 million for a corporation.

  • The announcement does not change the April 15th due date of the return. Only payment of tax is delayed.

  • In California, individuals will have until June 15 to both file and pay their state taxes.
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