Trump's Twitter Tirade

Markets have been left in a somewhat confused state today after President Trump declared that he has ended talks with democrats over delivering a new fiscal stimulus package. Writing on Twitter overnight Trump said: “I have instructed my representatives to stop negotiating until after the election when, immediately after I win, we will pass a major Stimulus Bill that focuses on hardworking Americans and Small Business.”

The news will be a heavy blow to Fed chairman Jerome Powell who praised the government’s response yesterday, while also calling on the need for further action. The two parties had been locked in talks aimed at delivering a second stimulus package which was touted to include another direct stimulus cheque for families and affected workers.

Political Divide Over Stimulus Size

Democrats had been advocating a $2.2 trillion package of support while the trump administration had been looking into delivering $1.6 trillion of aid. Democrats had reportedly lowered their figure to $2 trillion, an amount backed by House Speaker Nancy Pelosi. However, this figure was not supported by Republicans. Furthermore, aspects of the legislation passed last week, which was only pushed through with Democratic support, contained elements which were strongly opposed by the GOP such as government funding for abortions as well as stimulus cheques for undocumented immigrants.

Following his initial tweet, Trump followed up saying that he could be in favour of approving stimulus for airlines and small businesses, which could be provided out of the money left over from the first stimulus package. However, this idea was balked at by Democrats who remain in favour of wide-sweeping stimulus.

Trump Still Supports Direct Cheques

Confusingly, Trump then went on to say that he is in favour of sending out further direct stimulus cheques worth up to $1,200, saying on twitter: “If I am sent a Stand Alone bill for Stimulus Checks ($1,200), they will go out to our great people IMMEDIATELY. I am ready to sign right now. Are you listening Nancy?”

Trump’s insistence that he will pass a major new stimulus bill after he wins the elections have been viewed as another sign of how desperate he is growing ahead of the elections. As of October 7th, RealClearPolitics shows Biden leading Trump 51% to 42.6% in the polls with FiveThrityEight showing Biden leading Trump 53.2% to 45.6%.

Technical Views

S&P500

From a technical viewpoint. The S&P shed 2.7% in response to Trump’s tweets and while price has since recovered some, it remains below the 3391.75 level for now, which remains the key upside hurdle to break in the near term. While below here, market is at risk of a rotation back towards the 3226.50 level.

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