News of the Senate’s unanimous passing of the $2 trillion “Coronavirus Aid, Relief, and Economic Security Act” or “CARES Act”, late Wednesday, drove a historic rebound across risk assets for the 3-day period ending Thursday, March 26, as the S&P 500 Index gained 17.6%, the strongest 3-day rally since 1933. On Friday, March 27, the bill passed in the House of Representatives, sending the bill to the White House for the President’s signature.
The Congressional passage of the of the CARES Act comes on the heels of the Federal Reserve’s (Fed) Monday morning announcement of open-ended asset purchases, along with other policy support mechanisms, which failed to stem the U.S. equity market’s decline through Monday. This week, the White House has also expressed a desire to find ways to restart the U.S. economy, even if only in part.
The combined policy response of unlimited amounts of QE, policy and short-term market rates of interest near- zero, and multi-trillion dollars of fiscal accommodation comes with no true historical parallels. Policy makers have hastily set forth in an effort to counteract looming blows to U.S. economic data, which is likely to reflect a sharp slowdown of unprecedented proportions.