Second Stimulus Package Could Have Hugely Positive Effect on the Stock Market, Finance Expert Says

Republicans and Democrats have not been successful in agreeing on a second stimulus package. But, as Satori Fund founder and portfolio manager Dan Niles explained to Yahoo Finance, a second stimulus package could give a significant boost to the stock market. Although, as of right now, none of the proposals that the Democrats or Republicans have introduced lately have made any further headway in Congress.

Niles said that there are plenty of reasons why there could be a downturn in the stock market at the moment, explaining that flu season is coming up, the high price point of some stocks, and, of course, the coronavirus pandemic. Although, he did say that if Congress were to pass another stimulus package, it could affect the stock market. “So I think, you know, you can make a real good case that the market should be down a lot even from here. I mean, it makes no sense obviously that the S&P is flat. But then that gets us to the upside potential, which is the S&P is flat year to date because you had 30% of US GDP brought in as stimulus, both monetary and fiscal,” Niles shared. “And if you get a phase five stimulus package passed, then, you know, you could very easily see a nice 5%-plus move in the markets. And so we’re sort of positioned expecting a bit of a bounce. If we get a stimulus package, you’ll get probably get a much bigger bounce.”

This boost to the economy would be dependent upon whether Congress can agree on another stimulus package. Over the past several months, both Republicans and Democrats have been unveiling new proposals, but both sides can’t seem to agree on one specific package. More specifically, the two sides have a major difference of opinion when it comes to the total price point of the package. Democrats have unveiled plans in the $2.2 to $3 trillion range, while Republicans have not proposed a package that is worth more than $1.3 trillion.

Democrats recently unveiled their newest stimulus package, which would contain several items that Americans are most concerned with. Their package would include unemployment aid, the Paycheck Protection Program, and stimulus checks. Those checks would likely be worth $1,200, just as they were under the CARES Act. Unlike the previous package that Congress agreed to, the Democrats’ new plan would provide additional financial assistance for dependents, as eligible individuals would receive $1,200 per dependent with a limit of three.