By Aman Jain. Originally published at ValueWalk.
It is now almost certain that there will be no stimulus package before the election. However, if Joe Biden wins the election, something that all polls are currently predicting, it could further delay the stimulus package into next year. This is because if Biden wins the election, Trump will retain his presidential power until mid-January of 2021. Some experts believe that Trump may refuse to sign the coronavirus relief package (possibly including stimulus checks) into law, if he loses.
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Why Trump may delay coronavirus relief, stimulus checks
If Trump loses the election, experts believe he would have less incentive to approve the stimulus package in the lame-duck period. This may worsen the situation for the economy while people with coronavirus cases continue to surge in some regions.
“If Trump loses the election, he won’t be as motivated to pass a stimulus that the next administration would take credit for. We could see a 5 to 10% correction in the market if we don’t get a stimulus before the next administration comes in,” said Mitchell Goldberg, president of ClientFirst Strategy, according to CNBC.
The current market movement is likely already factoring in such a scenario. Probably, this somewhat explains the downturn in the market since earlier this week.
“At best, we might see something during the lame duck [congressional session], but the market is starting to price in nothing until January,” Art Hogan, chief market strategist at National Holding said, according to CNBC.
If this is true, Americans would have to wait for two more months for another stimulus. Generally, a two-month wait doesn’t seem like much, but with cases rising and unemployment at a significant level, every day counts. Several small businesses have reported a rapid drop in their cash supplies, and many may not be able to survive without any help from the government.
What if Trump wins the election?
Things, however, could change if polls prove wrong, and Trump wins the election. We saw something similar happen in the last election also. Trump trailed Hillary Clinton in the days leading up to the 2016 election.
Another deciding factor for the stimulus package would be the balance of power in Congress. Though Democrats are expected to retain the House, there is uncertainty over which party will dominate the Senate.
Investors “want some type of clarity. There’s a bit of uncertainty about a blue wave. What they really want is stimulus,” said Doug Roberts, managing principal at Channel Capital Research, as per CNBC.
Further, Roberts believes that growing coronavirus cases and uncertainty over a stimulus package may lead to some correction in the market. Though Roberts says it would not be a bear market, yet it could be a “fairly violent correction, bouncing around a bit until you see what’s going on.”
On the other hand, experts see the current market decline as an opportunity to enter the market. They expect the drop to continue until Congress passes the stimulus package.
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