by Maurice (Mo) Spolan, Investment Research Analyst
Stocks were mostly flat last week as the Dow, S&P and Nasdaq have now posted year-to-date performance of -7%, -0.4% and 15.7%, respectively. At present, the market’s focus is on the next round of fiscal stimulus, given that the $600-per-week unemployment benefits will expire on July 31. The GOP has proposed a plan that amounts to $1 trillion of support and is headlined by a one-time payment to Americans that begins at $1,200 and decreases according to income level. In addition, the plan would provide $100 billion to universities, as well as support for testing measures. However, the GOP is opposed to continuing the flat $600 weekly unemployment checks, because that quantity is often greater than what its beneficiaries earn in working wages. Therefore, the GOP contends, the unemployment benefits have discouraged individuals from seeking work. The GOP’s proposed unemployment benefit amounts to 70% of the working wage earned by its recipient.

Across the aisle, Democrats are lining up a support bill of $3.5 trillion. Democrats counter GOP concerns regarding flat-rate unemployment benefits by stating that more nuanced measures, such as those based on a percentage of wages, are overly complicated, and therefore, would not be effectively implemented within a useful time frame. Indeed, Nancy Pelosi remarked that the reason for the initial $600 flat rate was ‘simplicity’. Pelosi also added that the GOP’s unemployment plan is discriminatory, in that the government should not encourage individuals to return to work if they are afraid of getting sick.

When considering that a $2.5 trillion gap remains between the parties, Mitch McConnell noted that it is “unlikely” that a bill is passed prior to the expiry of the current unemployment benefits. Mark Meadows, White House Chief of Staff, suggested that the parties may attempt to agree on a shorter-term solution and then resume dialogue at a later date. Democrats have rejected this idea. While the disparity between proposals remains quantifiably enormous, both sides of Congress are incentivized to provide some order of fiscal relief before the August recess, which effectively marks the deadline for negotiation.