As stimulus checks hit our bank accounts and government spending continues to go up, people are asking, “What is all this spending doing to the markets and our economy?” The fact of the matter is that as government spending goes up, our economy will benefit. Not only that, but as The Federal Bank, also known as the Fed, keeps interest rates low, this entices investors to invest money and take loans.
Government spending and what the Fed controls and manipulates play different roles and go by different terminology. When the government spends money, cuts/raises taxes, and invests in infrastructure is called Fiscal policy. When the Fed moves interest rates and makes restrictions/improves the money supply; this is called Monetary policy. These 2 factors are very useful and powerful tools the government and the Fed use to get the economy going through tough times and maintain strong gains to keep the good times rolling.
Once stimulus money enters people’s bank accounts, it is like a firework with the fuse lit, waiting to go off. All this money is priming the pump in the economy for the year 2021. With interest rates continuing to be at all-time lows, businesses and people are spending money to invest in themselves. This could be through new warehouses, buildings, consumer goods, as well as others, such as in the stock market. Not only that, but people are also getting vaccinated, and places are starting to open. Due to the Fiscal and Monetary policy; combined with vaccinations, these factors are positive implications for the market and give us a confident outlook for the rest of the year.