News & nuggets
Virus & Vaccine
A new coronavirus strain first observed in the United Kingdom, which is believed to be significantly more contagious, has spread across borders and been observed in the U.S. in several states. The new strain is a stark reminder that despite approvals for vaccines and the beginning of mass vaccinations, there is still much ground to cover before the world moves on from the global pandemic and its economic effects.
Politics & Fiscal Policy
After the expected “blue wave” failed to materialize in the 2020 U.S. elections the expectations for fiscal stimulus moderated in both scale and timing. After delay, a compromise stimulus package of $900 billion, titled “Coronavirus Response and Relief Supplemental Appropriations Act”, was passed. President Trump threatened not to sign the law based on the $600 checks to individuals, which he argued should have been $2,000. He eventually relented and signed the bill. Afterwards, the House passed a bill to increase the checks to individuals to $2,000, which has been held up in the Senate. The debate around checks to individuals aside, the package includes a 10 week extension to enhanced unemployment benefits, significant support for small businesses, and vaccine funding among other expenditures. Notably, the bill did not include direct aid to states or the liability shield for businesses sought by Democrats and Republicans, respectively.
On January 5, the two remaining open senate seats will be chosen by Georgia voters. With those two seats come control of the senate. If Republicans win one or both of the seats, they will retain control of the senate with a 51 or 52 seat majority. Democrats need to win both seats to have a 50-50 tie, which would then be broken by Vice President Kamala Harris. A win by Democrats, combined with Biden becoming president and control of the house, would likely lead to more short-term stimulus, while a Republican win would split control of government, which has historically been positive for markets.
The Federal Open Market Committee’s statement from their December 15-16 meeting continued to message strong support for markets. As expected, and to be expected for a prolonged period, the Fed did not change the Fed Funds Rate. The Fed affirmed that asset purchases of at least $120 billion a month would continue “until substantial further progress has been made toward the Committee’s maximum employment and price stability goals.”
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