A Wave of Cash is Coming

Hey There Income Hunters,

On Friday, President-Elect Biden said Congress must act quickly on a new stimulus beyond last month’s $908 billion package. 

It would tap into the $4 trillion in total economic assistance Congress has already devoted to battle the devastating pandemic.

So the gift of giving continues.

And just look what it meant for the year-on-year numbers for December. The updated Power Income Reflation Indicator has hit another trifecta …

Power Income Reflation Indicator Breakdown:

  • M1 Money Supply: This is consumers’ most readily-accessible cash.
  • Fed QE: Quantitative Easing is the Fed’s only tool with rates already at zero. The Fed buys bonds from banks and credits their accounts held at the Fed. Banks can then make loans to the public or use the funds for market activity. The majority goes into the stock market.
  • Fiscal Policy: This is the most powerful form of reflation because money is injected directly into the economy. Stimulus checks are a prime example.

The Fed continues to set record highs in money supply and the size of their balance sheet each month. This is fueling the S&P 500 to record highs. See below:

Watch for more Details on the Next Stimulus Package this Week

Here is what you can expect to see:

  • Another $1,400 in new stimulus checks 
  • $370 billion in student loans wiped out under Biden’s current plan
  • Potential for much greater student debt cancellations under the Schumer-Warren plan; as much as $1 trillion
  • Major transfers of wealth to low-income segments, which would be very positive for economic growth

Look for 4,200 S&P in the First Half of the Year

Here’s why …

US households have already received $1 trillion in aggregate — and nearly $70 billion of that remains as “excess savings.” That number will rise as the second round of fiscal stimulus kicks in. 

Meanwhile, wage compensation levels are already back to pre-Covid levels. 

Notice how long it took to recover in the 2008 financial crisis 

The bottom line is this …

With previous stimulus more than offsetting lost income, the coming Blue Wave stimulus will create excess savings and fuel major growth in GDP in 2021. 

Short-term Market Conditions:

In the short run, there is risk a more severe Covid-19 breakout could cause a minor correction in the S&P 500.

However, a 5% pullback towards the 50-day moving average would be a great buying opportunity. 

On any pullback, I look to add to my core portfolio of high-dividend REITs and Energy infrastructure stocks.

For ideas, review my recent editorials for Power Income stocks I love in both sectors

Live and Trade With Passion My Friends,

Griff


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