A renewal of federal stimulus on top of monetary stimulus after the election is likely to support the stock market, says Bob Iaccino, editor of the Stock Think Tank.
The final package might be large or small, depending on who wins the presidential election — but the trend of dollar down, all else higher is likely to continue, Iaccino says.
Stimulus spending is “not necessarily something I want to see but that doesn’t matter, that’s not my job,” Iaccino told TDAmeritrade.
“My job is to kind of help predict what might happen. I think what might happen is you’ll see more monetary stimulus in the form of asset purchases once we get fiscal stimulus.”
It could be similar to what happened in Japan in the 90s, Iaccino said, when the Bank of Japan finally learned that it can’t intervene in the yen against the direction of the market.
“I think [Fed Chairman] Jay Powell knows that. I think this particular Fed knows that. They need fiscal and then they’ll pile on with monetary, and then you’ll see dollar lower, everything else higher,” Iaccino says.
The fiscal stimulus could come one of two ways: Big and fast or smaller, slower and more targeted, Iaccino continued. How that plays out will depend on the outcome of the vote Nov. 3.
“Now if we get one before, everybody agrees is going to be a ‘skinny’ stimulus that might not matter as much. It might just keep a floor under equities, and we might actually see a ‘sell the fact’ situation, if and when we get the smaller stimulus that Speaker Pelosi and Treasury Secretary Mnuchin have been working on.”
But, post-election, a Democratic sweep is likely to lead to even more stimulus.
“If if it’s a blue wave, we get a bigger simulus, we get it faster and we pay for it down the road with a pretty big equity repricing as the economy potentially falls off a cliff with increased regulations and higher taxes,” Iaccino said.
“Outside of that, I think you see a stimulus that’s a little bit smaller, a little more targeted,” he said. “Probably not at all what the market wants but probably still enough to keep a floor under the market.”
PayPal and Bitcoin
Separately, Iaccino commented on his interest in PayPal (PYPL) vis-a-vis Bitcoin.
“One the main theses behind PayPal was the trustworthiness of users of PayPal. PayPal has a massive trust factor in their name. Some 60% of people abandoned online transactions when PayPal was not attached to it, when you couldn’t pay through PayPal,” Iaccino said.
Bitcoin is benefiting from that trust today, he said.
“Whether they continue to or not I’m not sure, but I’m looking at $15,000 in Bitcoin now to be the next spot where I think it’s going to go and settle in as it settled in around [$10,000] as a psychological level. You’re going to get at least another $500 at a bitcoin at the next few days, I think.”
Iaccino says he is a big believer in the user case being a big part of Bitcoin, and PayPal just made it easier for you to buy Bitcoin on PayPal.
“When you have that trust factor that PayPal has and you see both of them are benefiting, PayPal’s up, Bitcoin’s up,” Iaccino said.
“This now brings a whole new crew of people saying, ‘Well, if PayPal has it I guess it’s okay.’ And they might dip their toe in and buy a couple. I think it’s a very big story for Bitcoin.”
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