Donald Trump addressed the nation from the Oval Office on Wednesday evening, more than 48 hours after he promised to deliver a “major” economic package to counter America’s burgeoning public health crisis.
For the last two days, lawmakers have debated the merits of various proposals including a payroll tax cut, which is the centerpiece of the administration’s “plan”, if that’s the right word.
It’s not clear that is the right word, though, because even as the president did offer some concrete initiatives, futures crashed shortly after he finished speaking.
Although the price action has been the very definition of “manic” lately (and could thus reverse overnight) one thing is for sure: Markets did not like the president’s decision to suspend all travel from Europe for the next 30 days. That won’t apply to the UK, apparently.
Trump effectively blamed the Europeans for not adopting stringent enough measures to curb the infection as it spread outward from China. “The European Union failed to take the same precautions [as the US]”, he said.
Dow futures and Nasdaq futures were limit-down.
As for the economic relief package, the White House is instructing the Small Business Administration to lend to hard-hit areas, and Trump said he’s asking Congress to increase SBA funding by $50 billion.
The Treasury has been instructed to defer tax payments for “certain individuals and businesses”, a move the president claims will result in $200 billion in additional liquidity for the economy.
He then called on lawmakers to agree to immediate payroll tax relief, something politicians on both sides of the aisle remain reticent about.
“Our main issue with this proposal is that it benefits higher-income households and doesn’t directly impact those most vulnerable – the elderly and those out of work who are not on payrolls”, ING wrote, in an e-mailed note. “The combination of precautionary measures and fear are driving the outlook for the economy and that won’t change until the prognosis for the virus changes”.
And that was about it from Trump. He told the elderly to be careful, reminded everyone that the big banks are well capitalized, bragged briefly about the economy and delivered this pseudo-warning to an unthinking pathogen:
The virus will not have a chance against us.
As one member of the Twitterati quipped: “COVID-19 hates us cuz of our freedom”.
“Trump’s measures are so light-weight compared to what we’ve seen in countries like the U.K. — we need Trump to be a general here, and markets needed to see something bi-partisan”, Pepperstone Group’s Chris Weston remarked, shortly after Trump finished speaking.
“They want measures that will go through Congress and get done within days, not after the November election”, he added, before warning that “investors will not hesitate to show what they think to the Fed and governments over the next few sessions”.
That’s pretty ominous. Especially considering how bad Monday’s session was and the fact that Wednesday found US equities sinking into a bear market (bottom pane) in what was yet another horrendous day on Wall Street (the red line in the top pane marks the beginning of the end, so to speak, for the bull market).
Remember, this comes after a session that found multiple companies (including Boeing) drawing down credit lines. That’s a bad sign. These half-hearted measures aren’t enough.
Boeing’s slide was so dramatic Wednesday that its market cap fell below Tesla’s.
“Travel restrictions equal slower global economic activity, so if you need any more coaxing to ‘sell, sell, sell’ after a massively negative signal from overnight trading in US markets it just fell in your lap”, AxiCorp’s Stephen Innes said.
In the minutes after Trump’s address, the NBA announced it will cancel games until further notice due to the virus. Tom Hanks said he’s infected.
Trump, meanwhile, canceled upcoming events in Colorado and Nevada “out of an abundance of caution”, White House spokeswoman Stephanie Grisham said.