How likely is a deal? What does it mean?
The US economy is going to need more help to get through the next few months. Businesses are beginning permanent layoffs and unemployed workers are running out of money, with few prospects for a quick return to work.
Most major economies have unveiled a new round of stimulus but the US has been deadlocked. Last week it looked like hopes for a stimulus package were dead.
Suddenly, it's been flipped with Pelosi now saying she's hopeful. Mnuchin has called this a last-chance effort but at the last minute is when most political deals are made.
The chance of a deal suddenly looks realistic. The White House is proposing $1.5T with escalators that could bring it to $2.0T if the pandemic continues. Pelosi's ask was $2.2T in her latest proposal so they're not that far off.
The market is clearly pricing in a rising chance of a deal and I believe it's responsible for essentially all of the equity market gains since Friday.
On just about every level, a deal makes sense but the political calculations are where it gets murky. Democrats have to be feel good about their election chances right now and I don't see how boosting the stock market and getting people another $1200 check with Donald Trump's name on it will help them.
At the same time, if they feel confident enough about their chances, they would rather not govern over a wreckage come January. But maybe there is a chance for a deal in the lame duck session? Mnuchin said he would try again then.
For Republicans, if they feel Trump is behind there has to be some urgency here. Few people have ever lost elections by giving away money. The Senate is an obstacle but if it's a bipartisan deal then it would only take a few Republicans to get on board.
Mnuchin and Pelosi are meeting at 12:45 pm ET and the market hangs in the balance. Expect some sense of whether a deal could come together to leak out of the meeting or shortly after.
