White House Stimulus Plans Rally Stocks

The U. S. stock market is riding a roller coaster right now. After one of the worst day in its history, the market was able to recover. The recovery was started by the Trump administration’s announcement of more details regarding its $850 billion package that was meant to serve as a stimulus package. 

Aside from the announcement itself, the package encouraged investors that the United States government has a plan in place to deal with the pandemic. The opening of the market was mixed initially but the White House announcement about their plans for reinvigorating the economy helped. The Dow Jones industrial average rose by 3.5%, the S&P 500 rose to 4.8% and Nasdaq by 5.2%.

The Announcement

President Donald Trump announced that his administration would be asking Congress for a stimulus package that amounted to $850 billion. That was meant to put some strength back into the markets after businesses ground to a halt and suffered over fears of the virus.

Around $50 billion of that stimulus package will go to the airline industry which is one of the hardest-hit industry right now. It remains unclear what would be included in the package, but there are rumors that it might include a payroll tax cut which Congress was not in favor of previously. There is also talk of just giving Americans cash as a direct way of stimulating the economy, like giving $1,000 to all Americans.

The proposal is bigger than the fiscal stimulus that was used to fight the 2008 crisis which was only $700 billion.

Is a Recession Inevitable?

Some fear that a global recession is now inevitable because of the pandemic. With airlines, restaurants, malls, and other businesses being forced to shut down because of lockdowns, travel restrictions, and lack of customers, experts are warning that a recession is not just a threat but is something that the world is dealing with now.

Recently published data showed that the economy of China was decimated by the pandemic during January and February. There was a drop in economic activity because of the lockdown that was required to deal with it. Now, that is being replicated all over the world.

In China, the retail industry declined by more than 20% while industrial output declined by more than 13%. Some economic experts are guessing that the world’s second-largest economy will decline by as much as 6% during the first quarter when compared with the 2019 first-quarter performance. 

China has been trying to get back its economy on its feet. It has been encouraging factories to start producing again, with precautionary measures in place to prevent another outbreak. China’s economic shutdown has affected the rest of the world since the global manufacturing apparatus is integrated into that of China.

With other countries now suffering the same fate that China went through during the first two months of the year, it is feared that the world is in for the worst recession that it has seen in a long time. The economic stimulus packages of the world’s governments might be too little too late.