Insights
Global Fiscal Stimulus Scorecard: The Cavalry is Coming, but Slowly & Arguing About Which Horse to Ride.
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Market Pulse
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March 15, 2020
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Global Fiscal Stimulus Scorecard: The Cavalry is Coming, but Slowly & Arguing About Which Horse to Ride. |
Monetary policy has been exhausted. Now, we turn toward fiscal stimulus and market support policies. This is taking place globally in an uncoordinated manner. Similar to the financial crisis in 2008, this is a messy process because it involves politics. But in our view, this is something elected officials need to do; the central banks cannot do it alone. Fiscal rescue policies typically follow this pattern:
What has been done so far: Fiscal Stimulus Scorecard
United States
Fiscal Policy Options
Trump | Pelosi & Schumer | Other Ideas |
Proposed:
Under consideration
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Furman
Other
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Source: Cornerstone Macro as of 3/12/2020 |
United Kingdom
Australia
Europe (ECB) (Note: ECB cannot control fiscal stimulus, so Europe is likely to stay most stressed)
Risk Considerations
There is no assurance that a Portfolio will achieve its investment objective. Portfolios are subject to market risk, which is the possibility that the market values of securities owned by the Portfolio will decline and may therefore be less than what you paid for them. Accordingly, you can lose money investing in this Portfolio. Please be aware that this Portfolio may be subject to certain additional risks. Fixed income securities are subject to the ability of an issuer to make timely principal and interest payments (credit risk), changes in interest rates (interest-rate risk), the creditworthiness of the issuer and general market liquidity (market risk). In a rising interest-rate environment, bond prices may fall and may result in periods of volatility and increased portfolio redemptions. In a declining interest-rate environment, the portfolio may generate less income. Longer-term securities may be more sensitive to interest rate changes. Mortgage- and asset-backed securities are sensitive to early prepayment risk and a higher risk of default, and may be hard to value and difficult to sell (liquidity risk). They are also subject to credit, market and interest rate risks. Certain U.S. government securities purchased by the Strategy, such as those issued by Fannie Mae and Freddie Mac, are not backed by the full faith and credit of the U.S. It is possible that these issuers will not have the funds to meet their payment obligations in the future. High-yield securities (“junk bonds”) are lower-rated securities that may have a higher degree of credit and liquidity risk. Public bank loans are subject to liquidity risk and the credit risks of lower-rated securities. Foreign securities are subject to currency, political, economic and market risks. The risks of investing in emerging market countries are greater than risks associated with investments in foreign developed countries. Sovereign debt securities are subject to default risk. Derivative instruments may disproportionately increase losses and have a significant impact on performance. They also may be subject to counterparty, liquidity, valuation, correlation and market risks. Restricted and illiquid securities may be more difficult to sell and value than publicly traded securities (liquidity risk).
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Managing Director
Global Fixed Income Team
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