President Trump Signs The Stimulus. Will There Be More?

Initially, President Trump wanted the stimulus to be raised to $2,000. Instead of torpedoing the entire vote, the stimulus passed as is and there will be a separate vote on raising the checks to $2,000. This isn’t an additional $2,000. It’s an additional $1,400 to be clear. 

The House passed this additional stimulus in a fast track procedure as the vote was 275 to 134 which means more than 2/3rds supported it. The President and the Dems agree. They both want a bigger stimulus. The Dems backed this 231 to 2.

The GOP opposed it as 42 voted yes and 130 voted no. If President Trump didn’t support this, even fewer Republicans would have supported it. It’s not fiscally conservative. It seems like a battle between Trump and McConnell. Marco Rubio supports this stimulus which means the vote would be close if McConnel allows it to happen. 

If it passes, it would spark another major rally in cyclical stocks (small-cap value). To make matters even more confusing and interesting, the Georgia Senate election is next week. If the Dems win and this latest stimulus doesn’t pass, another one is coming. 

Let’s look at the $900 billion stimulus that became law. This we know will impact the economy in January. There won’t be any impact on retail sales this month because the few days it was delayed. As you can see from the graphic above, with the $600 per person checks Goldman estimates Q12021 GDP growth will be 5% instead of 3%. 

Q1’s growth largely depends on the quickness of the vaccine rollout. However, there is no mistaking the stimulus’ impact on growth. The 2021 annual growth estimate was revised up a half a point to 5.8%.

ISM Composite Vs. Leading Commodities

The chart below shows the correlation between the rate of change of the ISM composite PMI and 3 leading commodities which are lumber, copper, and gold. Some investors don't like using gold as a correlation because it isn’t an industrial metal. 

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