James Bullard, the president of the St. Louis Fed, says that while the US stock market hitting all-time highs might seem out of touch with the reality of COVID-19, Wall Street’s record-breaking rally actually makes a lot of sense.
“I think Wall Street has called this about right so far,” he said, speaking after the S&P 500 and Nasdaq hit record highs this week.
He expects the US to perform better than expected as major corporates such as Walmart have found new ways to operate safely, and led others to adopt efficient modes of business.
“I expect more businesses to be able to operate and more of the economy to be able to run successfully in the second half of 2020,” he told Reuters.
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James Bullard, the president of the St. Louis Fed, said in an interview with Reuters that the US stock market hitting all-time highs might seem out of touch with the reality of COVID-19, but that Wall Street’s record-breaking rally actually makes a lot of sense.
He expects the US economy to perform much better than predictions suggest as businesses and households continue to mitigate virus-related risks, and the economy remains open.
As the world’s case total and death toll continues to climb, federal, state, and local officials take on varied stances on what constitutes safe activity under certain conditions.
People will make adjustments and fine-tune their behaviour in order to continue commercial and economic activity accordingly, Bullard told Reuters.
“I think Wall Street has called this about right so far,” Bullard said, and noted how firms like Walmart have found ways to operate safely during the pandemic, implementing measures such as encouraging shoppers to wear face coverings.
“There is a lot of ability to mitigate and proceed and most of the data has surprised to the upside … So I think we are going to do somewhat better,” he said.
“I expect more businesses to be able to operate and more of the economy to be able to run successfully in the second half of 2020.”
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His views contrast with those of the current Federal Open Markets Committee members who have agreed that “the ongoing public health crisis would weigh heavily on economic activity, employment, and inflation in the near term.”
Bullard, who will be a voting member of the FOMC in 2022, predicts that US GDP will shrink by 4% for this year — a more optimistic outlook than the -6.5% that his colleagues laid out in June.
But Bullard said he does not currently see the rush for any further US stimulus as that should depend on what circumstances will look like once the health crisis is contained.
It would also depend on whether the Fed wants to actively encourage more borrowing, spending, and activity to boost the economy into engaging in commercial activity, he said.
“At least for now expectations are that the Fed will stay where we are for a very long time,” he said. “The idea that you want to stimulate things presupposes that the virus has gone away.”
Bullard also said he is against implementing another lockdown in the US because a “lot more” is now known about the virus and its ability to spread than before.
His views are not in line with Minneapolis Fed President Neel Kashkari who recently warned that the US coronavirus case count can only be controlled under a stricter lockdown.
Kashkari, who is a voting member of the FOMC, said last week that further stimulus efforts must be executed to ensure people can stay home and sustain costs of living.
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