Wall Street Comes Up With a Wish List to Stem Coronavirus Pain
Wall Street investors are still reeling from market turmoil created by the coronavirus,
(Bloomberg) -- Wall Street investors, still reeling from market turmoil created by the coronavirus, are proposing an array of measures to help ease the economic pain brought on by the outbreak.
With U.S. cases of the virus increasing past 860, President Donald Trump said Tuesday he wants a payroll tax holiday and that his administration is preparing “substantial” economic measures to offset the financial turbulence. That would follow the Federal Reserve’s emergency step to cut interest rates by 50 basis points last week -- a move that failed to calm traders. The sudden shock of an oil price war that erupted between Saudi Arabia and Russia exacerbated the U.S. stock market’s wild gyrations.
Executives at major global asset management firms said central banks alone cannot stave off a recession. Here are some of their suggestions.
Gabriela Santos, global market strategist, JPMorgan Asset Management
“The big wish list is much more on the fiscal side,” said Santos. “It won’t completely offset or prevent the negative impact from Covid-19 or the oil price shock. But it’s to make this is a short-term problem and not a more medium to long-term problem.”
- Corporate stimulus: The federal government could direct funds to support small and medium-sized companies to help prevent layoffs, defaults and bankruptcies. That could include deferring payroll taxes.
- Support for workers: The government could also provide aid for furloughed employees or those who lose their jobs, particularly in the travel and leisure industries. More support for paid sick leave, postponing tax payments and support for child care in the event of vast school closures would be effective steps, she said.
Mike Ryan, chief investment officer Americas, UBS Global Wealth
Markets need to see a concrete sign that the U.S. government will put sufficient resources behind combating the virus.
“We need to see follow-through,” said Ryan. “Saying you’re willing to do things only gets you so far. Markets are going to look for validation.”
- Public health response: Federal and state regulators must direct emergency funding toward helping develop a vaccine, supporting hospitals and helping purchase supplies.
- Swift action: Consumer confidence will be undermined if policy makers don’t respond soon and the outbreak isn’t contained in about two months, he added. If new cases are contained in that period, the U.S. economy could rebound in the second half of this year, Ryan said.
Philipp Hildebrand, vice chairman, BlackRock Inc.
Thoughtful leadership will be necessary in a moment of stress like this, Hildebrand said in a Bloomberg TV interview Tuesday. “Whether we have the U.S. leadership that we did have in 2008 to sort this out, that’s a big question.”
- Welfare increases: Generous sick-pay support and arrangements like unemployment insurance should be considered, Hildebrand and his colleagues wrote in a report Tuesday. Governments could temporarily step up welfare programs by increasing benefits or reducing wait times for eligibility.
- Temporary rule suspensions: This will allow some flexibility to accelerate payments and cash grants via local governments, they wrote.
To contact the reporter on this story: Annie Massa in New York at amassa12@bloomberg.net
To contact the editors responsible for this story: Sam Mamudi at smamudi@bloomberg.net, Alan Mirabella, Josh Friedman
©2020 Bloomberg L.P.