It had surged after the “blue wave” election hopes, and dwindled as the legislation appeared to move off track. This is what happened over the last month:
To go further the deal will have to survive opposition from factions on both sides of Congress. But as things stand, it is another big dollop of money that will create a nice multiplier in terms of jobs and investment, with no new taxes to create fiscal drag. It may not be terribly responsible economic policy, but it should be good for the short-term prospects of the stock market if it stands up.
Longer term, making a deal on this issue makes it easier for Republicans to dig in their heels and say no to other items on the Democratic wish list, which is why many more left-wing Democrats are uncomfortable with it. But trying to make this deal does at least reduce the risk that nothing at all gets spent. So it is fair to say that the news really is market-positive as it leaves a Goldilocks scenario where at least some spending happens, but a wild dose of tax-and-spend is avoided.
The politics of the next few months, however, leave many possibilities open. If a compromise falls through, Biden can say he made his best attempt to reach a bipartisan deal, and then use that as cover for a more concerted attempt to ram through sweeping measures with only 50% of the Senate. Abolishing the filibuster also becomes more possible. And, of course, if even this deal cannot make it, the risk that the whole endeavor falls through (something the market doesn’t want to see) grows much greater.
This was a positive development. There is ample opportunity for more positivity, or negativity, over the months to come.
Survival Tips
The song they played before the ceremony was wonderful. I’ve recommended it before: Lovely Day by Bill Withers. It’s been one of the theme tracks to the pandemic. Have a lovely day everyone, and a great weekend.
John Authers is a senior editor for markets. Before Bloomberg, he spent 29 years with the Financial Times, where he was head of the Lex Column and chief markets commentator. He is the author of The Fearful Rise of Markets and other books.
One tip is that you should probably give up and take the day off if you have a big family event to attend to. My daughter graduated from high school today, it was a wonderful and emotional occasion, it took place in the physical world rather than Zoom, and it made rather a big bite out of the day. Maybe I should have used up a day of vacation.