The stimulus check delay and the impending wave of new coronavirus cases is beginning to impact Wall Street, signaling peril for the economy as a whole. According to a report by Reuters, Wall Street's main indexes fell fast on Monday. The ripple effects of these disruptions could be long-standing and could be felt around the world.
Analysts suggest that the death of Supreme Court Justice Ruth Bader Ginsburg on Friday was a contributing factor to the market plummet on Monday. Ginsburg's passing likely means even more delays on the badly-needed second stimulus check in the U.S., which Wall Street investors have been counting on to bring an influx of spending to the economy. The issue of whether or not to replace Ginsburg before the 2020 presidential election is likely to steal focus from the stimulus check in the U.S. Congress and investors are taking notice.
"It just kind of crowds out the agenda, the idea that we are going to get a fiscal stimulus package before the election," said QMA portfolio manager and managing director Ed Campbell. "There is also just general election-related jitters ... and possibly that we have a contested or delayed outcome."
Even before the tragic loss of Ginsburg, prospects for a second stimulus check were starting to look slim. The House of Representatives and the United States Senate have been negotiating the bill since May, but have barely crept any closer to a compromise. The signs of doubt on Wall Street are showing most clearly in the health care sector.
The Dow reportedly dropped by about 900 points on Monday, and the S&P 500 closed down by 9 percent from its record close on Sept. 2. The CBOE Market Volatility index, VIX, which attempts to measure the "fear" on Wall Street, reached its highest level in two weeks.
"Although nothing is being spared, the economically sensitive groups are getting hit the hardest," said Ameriprise's chief market strategist, David Joy. Joy said that stocks are being hit the hardest by the current fears, which show no signs of going away. "Washington appears to be no closer to a possible fourth stimulus package."
The stalemate in Congress is split between the two legislatures and the two houses, who both have different philosophies on how this negotiation should go. Republicans are asking Democrats to debate an itemized list of stimulus programs point by point, while Democrats are asking them to compromise on the overall budget of the bill. While Democrats have come down from their original proposal of $3.4 trillion to the price of the last major stimulus package — $2.2 trillion — Republicans refuse to consider anything over $1 trillion.