With gridlock in Congress, the US can expect a skinnier stimulus plan

Even before the election is settled, some themes are emerging about what it will mean for the American economy. And on Wall Street, there’s a growing bet that the country will get a smaller stimulus bill than some had hoped for, and that taxes are unlikely to increase.

That’s because gridlock is an increasingly likely outcome, no matter who wins the presidential election. Results so far suggest Republicans, who have been wary of another blockbuster aid package, could keep control of the Senate, according to the Associated Press. The Democratic hold of the House is narrowing.

In recent weeks, as the coronavirus pandemic spun out of control, investors grew increasingly fixated on whether another stimulus package would emerge. “That’s the algorithm,” said David Ellison, a portfolio manager at Hennessy Funds. “The market views the stimulus a bridge to a vaccine, to keep businesses solvent, to keep credit issues low, to keep unemployment from really showing up in consumption.”

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