The Covid-19 pandemic threw a wrench into America’s stock market, but indexes are recovering. Indeed, the S&P 500 is nearing a new all-time high and the Nasdaq Composite hit a record on last Thursday.
“There is a lot of liquidity in the economy and that has really helped the market deal with this,” said David Kelly, chief global strategist at JPMorgan Asset Management.
That doesn’t mean that there are no clouds on the horizon. Eventually, taxes and interest rates will have to be increased to pay for the pandemic’s economic costs, Kelly told Alison Kosik on the CNN Business’ digital live show Markets Now.
One of the mandates of the Federal Reserve, which sets interest rate policy, is to safeguard inflation. In a normal recession, inflation would be falling. But as this morning’s inflation report showed, prices are already bouncing back after falling for only three months.
The uncertainty doesn’t end there. This is an election year.
Former Vice President and Democratic candidate Joe Biden’s VP pick — Kamala Harris — provides some assurance that the party’s ticket is centrist and moderate, Kelly said, which “probably means less radical policy change.”
“If we have a Democratic win, you probably see some progress in reducing the deficit,” which would be helpful, he added. At the same time, taxes might rise, as could interest rates.
Under a re-election of President Donald Trump, there might be more uncertainty with regards to America’s fiscal health, Kelly said.