The Federal Reserve Board’s self-proclaimed “whatever-it-takes” policy for Covid-19 stimulus, coupled with the lack of controls surrounding CARES Act stimulus funds, are dangerous to the future of the economy and the markets, a majority of chartered financial analysts (CFAs) said in a new survey.

The CFA Institute's findings, which are based on responses from more than 8,000 investment professionals taken between July 10 to July 20, offer real-time insights from professional investors as Congress continues a heated debate over what the next round of stimulus relief will look like.

CFAs signaled that they understand that Covid pandemic put the economy on a ventilator, with about 60% supporting the current record levels of financial stimulus that Congress and the Federal Reserve have delivered.

But less than 44% believe that new stimulus is needed. And 65% do not support the Fed’s proclaiming unlimited stimulus authority. Federal Chairman Jay Powell has stated the U.S. government’s stimulus commitment needs to follow a “whatever-it-takes”  approach to prevent economic illiquidity from becoming insolvency.

“Many wonder about the source of that authority and the precedent it sets for fiscal accountability,” the CFA Institute said.

Key findings from the survey included the following:

• Over 75% of CFAs believe the level of oversight and reporting of emergency relief efforts by the Treasury, Federal Reserve and the Small Business Administration are insufficient.
• A majority (70%) of CFAs reported they are most concerned about eventual inflation.
• Only 35% of CFAs agree with the Fed’s view that the levels of response must be unlimited in terms of extending monetary and fiscal support.

“CFAs are overwhelmingly concerned about the Federal Reserve’s intervention in corporate credit markets and the risk and [the] proliferation of 'zombie' companies and zombie markets,” the survey report said.

Financial professionals also reported far-reaching concerns about ever-expanding, stimulus-induced deficits. “We asked members what specific concerns they had regarding market integrity and budget deficits that will result from the current stimulus levels and beyond. A large majority of respondents expressed concerns over several potential deleterious effects of deficit-funded Covid support,” the institute said.

CFAs said they worry that free-market capitalism could be irrevocably impacted, and agreed that Congress “should be asking honest questions about what is next, for how long, and how to ensure honest oversight so that these relief efforts are not be allowed to continue in unlimited fashion or in the shadows,” according to the report.

With some 70% of CFAs reporting they are most concerned about eventual inflation, most are concerned “the government’s actions will cause serious price discovery disruptions for investors and markets,” the CFA found.

CFAs also expressed deep concerns about stimulus programs oversight and accountability. The most unequivocal finding in the survey was that CFAs want adequate levels of transparency and accountability around the distribution of the record amounts of bailout support.

“Accepting that this is an economic emergency and that public officials deem spending authority as limitless, transparency around the terms and where the stimulus dollars land remains the only check and balance,” the institute said.

Congress appropriated $2.6 trillion in emergency assistance for people, businesses, the health-care system, and state and local governments. Meanwhile the SBA processed over $512 billion in guaranteed small business loans but, according to the GAO, isn’t ready to address fraud risks and hasn’t said how it plans to oversee the loans.

At the same time, the Internal Revenue Service and Treasury made 160.4 million payments worth $269.3 billion to taxpayers as of May 31, including payments to more than a million deceased individuals, the GAO reported.

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