Dow Jones Set for a Disastrous Week as Coronavirus Relief Package Hits Roadblock

  • The Dow Jones Industrial Average is set for another poor week as House Speaker Nancy Pelosi expresses dissatisfaction with a key relief package.
  • JPMorgan strategist says the lack of an immediate, large-scale stimulus package could cause further capitulation in the market.
  • Major institutions like Morgan Stanley and BofA are predicting a 2008-style recession in the first half of 2020.

The Dow Jones Industrial Average (DJIA) closed with a 4.6% drop on Friday despite the Federal Reserve and the Treasury’s willingness to introduce major stimulus. The Dow could be set for another week of under-performance as the massive coronavirus relief package sees an abrupt roadblock.

On Capitol Hill in Washington, D.C., House Speaker Nancy Pelosi emphasized she isn’t convinced by the Trump administration’s proposed $2 trillion coronavirus relief package, stating “from my standpoint, we’re apart.”

The package, which White House Economic Advisor Larry Kudlow says is equivalent to 10% of the economic output of the U.S., was expected to alleviate significant pressure from the markets in the coming days.

JPMorgan: lack of aggressive fiscal policy will hurt stock market

In a note to clients, JPMorgan chief U.S. equity strategist Dubravko Lakos-Bujas said that a failure to implement an aggressive fiscal policy in the immediate term could result in a “broader capitulation of equities.”

The Dow Jones has already broken below the 20,000 level, and there exists little to no technical support between 19,174 and 18,300.

The Dow Jones Industrial Average is coming off its worst week since 2008. | Source: Yahoo Finance

Fiscal policies may not prevent a further downtrend in the Dow Jones, as the selloff has been driven primarily by fear concerning the spread of coronavirus.

Strategists like Chantico Global founder Gina Sanchez said that only a reduction in the number of new coronavirus cases would result in an extended recovery.

But, large stimulus packages could slow down the…

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