Stimulus concerns return, but how much can they really hurt equities this time?

Trump brings back stimulus jitters into the market, but will that last?

The key news overnight was that Trump put a halt to stimulus talks until after the election, and that sent risk assets shuddering with US indices closing over 1% lower.
He did attempt to walk some of that back by tweeting out standalone parts of the bill and saying that he is ready to sign off on those at any time.
Trump even agreed with Fed chair Powell for once, on the need for more fiscal aid.
But let’s face it, the Democrats aren’t going to bite – not with the election coming up.

So, this pre-election deal or no deal debacle is finally starting to have more of an answer and it isn’t something that equity investors will quite like.

 

That may lead to some caution in the near-term but if the election promises to be a sweep on either side (for now Biden has the edge in that sense), then perhaps stocks and risk may not crumble entirely over the next few weeks.
If talks are indeed paused, then one can expect the election campaigning to also center around promising big stimulus measures and that could somewhat give market participants some hopeful optimism ahead of 3 November.
In that sense, a ‘blue sweep’ will increase the odds of the market feeling less jittery of stimulus aid to follow but then it will also depend on how Congress shapes up to be at the end of it all. If it is still divided, then perhaps the jitters will persist for longer.
But as long as there is hope, it is a fair argument to say that stocks may get more of a lift from positive stimulus talks than see a drastic fall from negative developments instead.
Going over to the S&P 500, the push higher yesterday was also capped by resistance around 3,234 to 3,238. But any material downside move will only come if we see a break below the 100-day moving average and 3,200:
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