Democrats and Republicans have tried to hammer out the details of a second stimulus package in recent weeks, but have struggled to find success. This lack of movement has sparked concern among government officials and everyday citizens, but Wall Street is expressing worry about something else entirely. Federal Reserve officials and private economists have specifically mentioned a surprising run-up in U.S. Stocks toward their highest levels.
According to Bloomberg, the drastic increase "seems an anomaly" and concerns several figures from Wall Street and Capitol Hill. The S&P 500 Index notched gains for the third straight week despite the lack of movement on the second stimulus package. Now economists have warned that there could be a sharp selloff based on the vulnerability of the market. Additionally, some figures in Washington have expressed concern that the equity gains have removed some of the "pressure points" in the ongoing negotiations.
"If there is one part of the narrative that leaves me feeling naked and afraid, it is the story out of D.C.," Peter Tchir, head of macro strategy at Academy Securities, told Bloomberg. "I expect that inaction out of D.C. and the process around executive orders will weigh on the market." An indicator of potential issues surfaced on Tuesday when Senate Majority Leader Mitch McConnell said the stimulus negotiations were at "a bit of a stalemate." Following this statement, the S&P 500 fell by 1% in a single day. It later recovered to reach 0.6% for the week.
While Wall Street still expresses concern over the lack of movement, Speaker of the House Nancy Pelosi recently spoke out about the negotiations. She blamed Republicans for the failed talks in a recent letter to her Democratic colleagues. CNN reports that she wrote that negotiations have been "complicated by the complete disarray on the Republican side — as President Donald Trump contradicts his own negotiators and his own position."
Senate has formally adjourned for the time being and the House of Representatives will not hold any floor votes until mid-September. Now there are even more questions about when the two sides will come together to negotiate the stimulus package and if they will come to an agreement. Although the Democrats and Republicans will have to agree on a total amount. The recently-proposed HEALS ACT would cost $1 trillion, but the Democrats have called for more money. Pelosi mentioned this aspect in the letter and said that Democrats would be willing to consider a $2 trillion price tag.