Fisher Investments Editorial Staff

A Confused Chorus

By, 07/08/2009

Story Highlights:

  • Calls for more fiscal stimulus are rising, citing the continued downturn as proof the feds' efforts are so far failing.
  • The current round of spending isn't even close to complete—never mind that once spent, it'll take a while to show up in the economy.
  • Though recent stimulus has been moving slowly in the US, it's been generally deployed faster abroad.
  • As signs of economic stabilization surface with the next wave of spending still pending—imagine what happens when it does in fact hit. Stocks will price it all in looking ahead.


Traditionally the Greek "chorus" represented the voice of "the people," helping clarify a play's plot. Like: Yes, that's Oedipus's mother, and, no, he didn't realize. Nowadays, our chorus is online. And as technology allows "the people's" opinions to proliferate, sometimes the chorus gets confused. Here's one confusing refrain: It's time to think about a second round of fiscal stimulus (here and here for example)—the continued downturn proves the first round is failing.

But wait, we need a counter chorus! Set aside for a moment the notion the economic recovery is faltering—a couple months' worth of data isn't enough to tell either way. The first round of stimulus isn't even close to complete. How can we call for more stimulus before the current amount is spent? Never mind that once spent, it'll take time to show up in the economy. It's simply too early to consider another package.

But what about the fact it's taking so long to deploy? The US is moving too slowly! Well maybe. But global investors need to think globally. Looking abroad, global stimulus continues apace. Countries in Europe and Asia are putting fiscal stimulus to work faster than here in the US.

And back home: Is the US really moving too slowly? Let's not forget TARP predated Obama's stimulus package. TARP was almost equal to the pending round, weighing in at $700 billion. And though not specifically stimulus, it was significant fiscal spending targeted at the very heart of the problem—financial system stability. In fact (counting on our fingers), we're already in the second round of fiscal stimulus. Remember those rebate checks sent way back in the halcyon days of yore (Spring 2008)? Well before TARP was even a glimmer in our bureaucratic eye? What was the number again? Oh yes, a mere $152 billion—over four times France's current program. You can add the budget deficit in there too. The US fiscal policy response has hardly been insignificant to date. And the economy is arguably in much better shape than it would otherwise be, thanks in part to the feds' aggressive fiscal and monetary actions.

Further, with so much additional stimulus waiting in the wings, we'll be feeling its effects for some time yet (probably well into 2011). And considering signs of economic stabilization are surfacing before most of the current stimulus has been deployed—imagine what happens when it does in fact hit. That's a great thing for stock investors right now. The market will price in continued stimulus spending well before our confused chorus is certain it's even worked.

Calls for a second round—ahem, third round—of stimulus or faster deployment of the current round are misguided and premature. We've spent plenty already and there's more assistance on the way. Including monetary measures, the historic wave of stimulus continues intact. And by Zeus's beard, at some point, it'll strike the economy like an electrifying thunderbolt from above! (Okay, maybe not quite that dramatic. But you get the point.)

*The content contained in this article represents only the opinions and viewpoints of the Fisher Investments editorial staff.

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*The content contained in this article represents only the opinions and viewpoints of the Fisher Investments editorial staff.


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