I am in no position to predict the outcome of the election or the prospects for improvements in public-health conditions. But I do have some confidence identifying possible economic scenarios and their consequences, and on this question, timing is important. Whether a comprehensive policy response is enacted now or in a few months bears directly on its potential impact.
After all, for every day that lawmakers delay, there will be even less hiring, more layoffs and greater risk of corporate bankruptcies, especially among the growing number of companies whose financial resilience is eroding as they face tighter lending conditions and their cash burns continue. Accordingly, the longer the delay, the greater the problems that any future package will have to address and the harder it will be to design and implement.
Over the past few years, investors have tended to be richly rewarded for setting aside traditional determinants of market value and focusing on just one thing: plentiful and predictable liquidity injections into the marketplace. But the next few months will likely be a bigger test for this wager. Wall Street has decoupled from Main Street in a way that few expected. It would be a mistake to keep extrapolating into the future without stopping to ask about the mounting collateral damage and unintended consequences.