[ abstract ]The most important part of the Biden deal is fiscal stimulus; The super expected stimulus plan will push up the inflation expectations of the United States, push up the yield of US bonds, make the interest rate curve steeper, and the rebound of the dollar index is expected to continue.
On January 14, 2021, Biden announced a fiscal stimulus plan with a total scale of up to 1.9 trillion US dollars, mainly for epidemic prevention and control, assistance to residents, small businesses, state and local governments, etc.
In terms of overall size, the new stimulus plan is twice as large as the 900 billion stimulus bill passed in December.
In terms of subdividing projects, the Biden government plans to directly pay $1400 to most Americans, and the total relief amount will reach $2000, including $600 in December
Assistance to state and local governments also increased to $350 billion, instead of the $160 billion that was not approved in the previous round. At the same time, most projects were significantly postponed to the end of September, while most stimulus bills in December were only slightly postponed for three months.
Founder Securities believes that, considering that most of the projects of this round of fiscal stimulus plan are postponed to the end of September, and the 900 billion stimulus bill passed in December, the disposable income of American residents will rise significantly in the first quarter of 2021, and maintain a high level in the second and third quarters under the support of unemployment subsidies and other policies.
In terms of Congress, the Democratic Party currently controls the House of Representatives by 222-211 and the Senate by 51-50. The Republican Party will pass a "lengthy speech" in the Senate to block the passage of the bill, but the Democratic Party can use "budget coordination" to avoid obstruction, and only a simple majority can pass the bill. Budget coordination is generally used once a year, and Trump used it twice in 2017.
Founder Securities believes that the US federal government needs to issue additional treasury bonds to support large-scale fiscal stimulus, which will promote the process of economic recovery and re inflation and raise inflation expectations. The US economic recovery and rising US bond yields will support the US dollar index.
