Key Points
- Stock markets around the world welcomed the COVID-19 fiscal stimulus programs; but now those programs are starting to expire.
- If not extended or replaced, the fading support for the unemployed raises the risk of weakening economic momentum, turning the V-shaped recovery into a W.
- As investors seem to be discovering with international stocks outperforming in recent weeks, there are very different implications for U.S. and European workers.
Stock markets around the world welcomed the COVID-19 fiscal stimulus programs; the passage of the CARES Act in the U.S. in late March coincided with the start of the market rebound.
But now these programs are starting to expire. Key support for the unemployed in the U.S. and Europe is set to fade, raising the risk of weakening economic momentum and turning the V-shaped recovery into a W.
In the United States, an additional $600 per week for the unemployed expires July 31. The average unemployment payout without the CARES Act benefit is only $333 per week. Losing the extra $600 a week is like a two-thirds cut to income for 17 million Americans receiving state unemployment benefits.
Investing implications
International stocks have outperformed U.S. stocks during six of the past eight weeks, including last week. One of the reasons may be the looming expiration of labor support programs and the different impact this could have on the unemployed in the U.S. compared with Europe.
