Page 9 - Investment Outlook
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United States
significant downside risks. To avoid a prolonged recession and weak recovery, Powell said “additional policy measures” might be needed.
US House Democrats have proposed another US$3tn Covid-19 fiscal stimulus package, which
if passed, would stand as the largest relief package in history - dwarfing the US$2 trillion stimulus measure enacted in March. The proposal for further stimulus came as the US Treasury announced that
it would borrow US$3 trillion this quarter alone
to fund its existing stimulus packages, taking total government debt above US$25 trillion. Additional borrowing is expected to push the US fiscal deficit to 19% of GDP, nearly double the 10% it hit during the peak of the global financial crisis ten years ago.
However, Powell said: “Additional fiscal support could be costly, but worth it, if it helps avoid long-term economic damage and leaves us with a stronger recovery.” The severe decline in economic activity has already erased all the job gains of the past decade with the unemployment rate spiking to 14.7%. The unemployment rate during the Great Depression peaked at an average of 24.9% in 1933.
We have been encouraged by the extent of market stability in credit markets that the Federal Reserve
has offered.
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