The coronavirus pandemic and the economic recession have not hampered the stock market so far, but that could change soon. Several economists and analysts spoke to reporters from Fortune this weekend, saying that the stock market will begin to suffer soon if another stimulus check is not passed soon. That puts the fate of the economy in the hands of the U.S. Congress.
Despite record-high unemployment, the closures of businesses and complications with imports and exports, the stock market itself has not suffered tremendously throughout the coronavirus pandemic. Economists say this is thanks in large part to the CARES Act — the first major stimulus package passed by the House of Representatives and the United States Senate back in March. This $2.2 trillion package led directly to a 51 percent rebound for the S&P 500, but that momentum could run out soon.
"A lot of the market rebound is based on the premise of continued stimulus," said Nela Richardson of Edward Jones Investments. "If there's a hole in that argument for the markets, you might see a pullback or more volatility."
Mark Zandi, a chief economist at Moody's Analytics, added that, to some extent, even the current state of the stock market is based on a catch-22. He noted that "some lawmakers are ... taking some solace in the stock market and certainly, the President is," but at the same time, "the market is taking its cues from lawmakers expecting them to pass a rescue package."
"And that is a huge error," Zandi said. he went on to add: "Every forecaster that does this for a living on Wall Street is expecting $1.5 trillion to $2 trillion in fiscal rescue. If that doesn't happen, and the odds of that happening continue to decline, there's going to be a selloff in the stock market."
While the stock market does not always indicate the state of the American economy as a whole, it does impact people from every walk of life, whether they are direct investors or not. In addition to helping dictate prices and availability of some goods and services, the stock market is the source of income for most retirement plans. It supports the security of banks and other financial institutions.
Right now, lawmakers are at a stalemate in negotiations for the next stimulus package, with no hope of pulling out of it until at least mid-September, when the Senate returns from recess. In the meantime, more and more Americans are focused on keeping the pressure on their representatives in the hopes of getting some much-needed relief passed soon.