7 Top Growth Picks For October On Truncated Stimulus Hope

On Oct 7, U.S. stock markets closed sharply higher after President Donald Trump tweeted urging U.S. Congress to immediately pass a coronavirus-aid package for some specific segments of the economy.

This was in contrast to Trump's tweet on Oct 6 when he asked his administration to halt negotiations with Democrats regarding a full-phased fiscal stimulus till the scheduled U.S. election on Nov 3. Wall Street saw an immediate downturn and ended sharply lower as soon as the news broke. However, investors' hope for at least a truncated second round of stimulus package helped the market to more than offset the previous day's losses.

A Partial Fiscal Stimulus

President Trump has urged Congress to clear $25 billion for airline payroll support and $135 billion for a small business paycheck protection program. Both of these aids could be paid out of unused funds from the Cares Act, which came to an end in July. Moreover, Trump has also sent a stand-alone bill of $1,200 per individual as an unemployment benefit.

Notably, the $2.2 trillion of the first round of coronavirus-relief package — popularly known as the CARES ACT — terminated at July end. Meanwhile, coronavirus-led severe economic devastation compelled lawmakers to inject another round of stimulus.

However, the U.S. Congress failed to reach an amicable solution regarding the size and scope of the aid package. The Democrats want a package of $2.2 trillion while the Republicans settled for $1.6 trillion.

Importance of Fiscal Stimulus

In the absence of the second round of stimulus, it appears that the U.S. economy lost the pace of its recovery. Lack of stimulus will significantly hurt reopening stocks like airlines, leisure travel, restaurants and bars, cinema hall and theater operators, theme parks, and other entertainment segments.

A series of economic data for August and September like jobs data, retail sales data, durable goods orders data, manufacturing data, and consumer spending data, has slowed compared with the previous four months. Several large companies of airlines, and media and entertainment industries have decided to furlough thousands of jobs without further government aids.

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