Focusing on the fiscal

Posted by: Paul Donovan

13 Jul 2020

Daily update

  • Equity markets seem relatively unconcerned with the rising number of US COVID-19 cases. Although fear in the US would appear to have increased, the level of fear is nothing like that seen earlier this year. National lockdowns remain very unlikely. There is also the possibility that the increase in cases will encourage further fiscal stimulus.
  • The Europeans are debating fiscal stimulus too, ahead of the EU summit on Friday. Finland has joined other countries in suggesting less stimulus and more political control over the stimulus. There was zero chance of any money being paid out any time soon, and national governments will be leading fiscal policy in the months ahead. But markets would prefer signals of unity and recognition of the scale of the crisis.
  • A YouGov poll surveying global consumers is underscoring the problem of survey evidence at the moment. The poll suggested a windfall of a month's salary would be saved by most people. Many people in lockdown have been forced to save roughly a month's salary. The evidence is that they are spending it, not saving it, once lockdowns ease.
  • Bank of England Governor Bailey and Fed President Williams talk LIBOR. A worthy subject, but not a market focus. Kaplan of the Fed is also speaking.

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