Market News & Analysis
4 Stocks Poised to Benefit with “Helicopter Money” Incoming
Matt Weller, CFA, CMT March 18, 2020 8:32 PM
In yesterday’s coronavirus press conference, US President Trump promised a “big, bold” stimulus package (reportedly in the $1T+ ballpark), with Treasury Secretary Mnuchin stating that the federal government was looking at “sending checks to Americans immediately…Now, and I mean now. In the next two weeks."
President Trump went on to suggest that such checks could be larger than the $1,000 floated in the media and by other lawmakers. These measures to directly put money in the hands of US consumers would follow on comparable programs taken in Hong Kong, Macau, and Singapore last month and could lead to similar efforts be taken up in other countries in the coming weeks.
Such examples of “helicopter money” do have an historical precedent, including under the last US Republican President George W. Bush in 2008 in response to the Great Financial Crisis and in Japan in 1999, though their effectiveness in boosting the economy is still up for debate. In this case, the checks are meant more to prevent the worse effects of a sudden recession (read: allowing laid-off workers to buy food and pay their mortgages) rather than to stimulate a slow-growing economy and therefore may be more likely to achieve their aim.
In any event, this “new” policy will have a major short-term impact on the economy and markets. Amidst an ongoing de facto national quarantine, surging unemployment, and likely recession, it’s unlikely that Americans will rush out en masse to use the funds on a new car, vacation, or other discretionary purchase; instead, the biggest boost will likely be to consumer staple companies that supply the goods and services that consumers can’t possibly live without. In other words, some of the biggest “winners” in recent weeks are poised to build on their gains.
Despite the big selloff in recent weeks, several consumer staple stocks bucked the bearish trend to hit new 52-week highs yesterday, including Clorox (CLX), Campbell Soup (CPB), General Mills (GIS), Kroger (KR). Each of these defensive companies are beneficiaries of the de facto global quarantine and as long as the current state of affairs lasts, they are poised to outperform the broader markets:
Source: TradingView, GAIN Capital
In times of crisis, investors focus on the safe return of their capital, rather than maximizing the return on their capital. Amidst the biggest economic and market crisis in at least a decade, it may make sense to focus long positions in the companies churning out staples like disinfectants and basic foods!
This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this report, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs.
GAIN Capital Singapore Pte. Ltd., may distribute reports produced by its respective foreign entities or affiliates within the GAIN Capital group of companies or third parties pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed to a person in Singapore who is not an accredited investor, expert investor or an institutional investor (as defined in the Securities Futures Act), GAIN Capital Singapore Pte. Ltd. accepts legal responsibility to such persons for the contents of the report only to the extent required by law. Singapore recipients should contact GAIN Capital Singapore Pte. Ltd. at 6826 9988 for matters arising from, or in connection with the report.
In the case of all other recipients of this report, to the extent permitted by applicable laws and regulations neither GAIN Capital Singapore Pte. Ltd. nor its associated companies will be responsible or liable for any loss or damage incurred arising out of, or in connection with, any use of the information contained in this report and all such liability is hereby expressly disclaimed. No representation or warranty is made, express or implied, that the content of this report is complete or accurate.
GAIN Capital Singapore Pte. Ltd. is not under any obligation to update this report.
Trading CFDs and FX on margin carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit cityindex.com.sg for the complete Risk Disclosure Statement.
Cryptocurrencies are not legal tender currency and trading of derivatives on Cryptocurrencies are currently not covered under any regulatory regime in Singapore. Consequently, investors should be aware they do not have protection under the Securities and Futures Act (Cap. 289). Please ensure that you are fully aware of the risks.