IRS checks and EU rescue plan
The Internal Revenue Service (IRS) has sent out notices that it will mail the paper checks starting Apr 24 for $1200 as relief money and those who had set up direct deposit with the federal government must have already got their money.
Discretionary spending had taken a terrible beating, ever since the virus spread around the globe. This has affected all aspects of the economic and commerce chain.
So, if you have your immediate expenses covered, you will have some money for your second tattoo or a new Spider-Man suit. By the way, if you are in the state of Georgia you really can get a tattoo done but I am very curious to know how they do it from six feet apart.
News just came in that EU leaders have agreed on a huge economic rescue plan. Normally, EU meetings end up in big discord but looks like they are in unison on this one and are putting on a brave face to handle the situation.
Since many countries are involved in the EU, decisions on such matters don’t come that quickly like in US, China, or Japan.
EU Inflation Chart
So, it is clear that there is a concerted move by world policy makers to combat the situation by flooding the world with money. Since all are inflating, what matters is the size of the debt relative to the size of the economy.
In the near term, all policy makers will continue to pump more, and the ratios could get much bigger (i.e. debt to GDP). The idea is in the post-coronavirus environment, the government debt will be inflated away meaning we will also have inflated growth.
This doesn’t work so well in a normal world where global economies perform unevenly. But in a world where everyone is going through the same problem, these policies become a global reset of prices. Nonetheless, it changes the dynamics for many asset classes and sectors of the equity markets.
One thing is clear – anything digital should continue to do well and some will do extremely well. Facebook just launched their mobile video gaming console. What a time to launch it! An enviable position to be in with a 2 billion + immediate user base across its product suite.
Will talk about specific asset classes over the weekend.
Have a safe weekend.
Abraham George is a seasoned investment manager with more than 40 years of experience in trading & investment and portfolio management spanning diverse environments like banks (HSBC, ADCB), sovereign wealth fund (ADIA), a royal family office and a hedge fund.