The United States just announced a very large stimulus package, does this mean that ASX shares will rise?
President Trump and US Treasury Secretary Steven Mnuchin announced they were supporting a US$1 trillion stimulus package which would include US$250 billion of cheques for American households. This would be larger than the US action during the GFC.
Not only will there be payments for households, but the Trump administration will also provide support for airlines and hotels which are currently experiencing a huge drop in volumes.
The initial idea by US President Trump was for a payroll tax cut, but that would be slower relief and wouldn't help people without a job. How quick will these payments come? The US aims to get it done within two weeks.
This action is in addition to the Federal Reserve acting to buy up to US$1 trillion of short-term corporate debt and offering $500 billion of overnight loans to banks. Plus the large interest rate cut.
How did US shares react?
The S&P 500 (INX) ended 6% higher after the news, which was a strong reaction considering it was down slightly at 10am US time.
The biggest shares reacted positively with the Microsoft share price up 8.2%, the Amazon share price up 7%, the Apple share price up 4.4%, the Facebook share price up 2.3%, the JPMorgan share price up 6.1%, the Berkshire Hathaway share price up 4.6%, the Visa share price up 3.9%, the Mastercard share price up 1% and the Alphabet share price up 4.2%.
What will this mean for ASX shares?
Well there are a few shares that have a presence in the US which may indirectly benefit a little like Computershare Limited (ASX: CPU) and so on, but it won't be a large impact. But it will provide investors with a bit more hope that the US won't go into a painful recession and our share market does tend to follow the US market in the short-term. Time will tell what the S&P/ASX 200 Index (ASX: XJO) does today.
A lot of countries seem to be announcing plans at the moment. The UK also announced a £330 billion package.
