Morning Notes — Fiscal Scenarios

Fiscal cliff: Little progress has been made on a fifth coronavirus relief package, but there’s interest from all sides to get something done.  Timing is important as the longer this drags out, the greater the potential for  lasting economic damage.  US activity momentum was already slowing somewhat, but the prior run rate was fast enough to accommodate the slight downshift and a few days of life without added fiscal support.

Fiscal scenarios: 1) a final fiscal package of $1T or less would be negative for risk-assets; 2) something in the $1T-$1.5T range seems to be the consensus view and would likely lead to secular growth/momentum outperforming (Tech and Consumer Discretionary) value (Materials, Financials and Energy) in a lower volatility grind higher; 3) a $1.5T-$2T package would probably result in incremental money moving into value, but not at the expense of secular growth/momentum and; 4) something north of $2T could start a short-lived rotation into value at the expense of secular growth/momentum.