Stimulus Package Impact on Stock Market

The U.S. has recently passed a $900 billion stimulus package, but what does this mean for my portfolio? We ran through the numbers and here are our predictions. Of course, we’re not an oracle so do your own research (otherwise we would already be on a beach in the Bahamas instead of hustlin’).

Methodology

Since we believe that the recent bull market has been propelled in large part due to the Federal Reserve maintaining low interest rates and pumping cash into the markets via quantitative easing, we used the M2 supply as discussed in our previous article. We used the M2 supply and performed a regression analysis based on quote data from various indices and came up with a linear formula. Here are the various indices we looked at and their respective formulas, with the output (y) being the quote price and (x) input being the final M2 supply figure in billions. Keep in mind that IPO is the newest of the bunch and we only have 7 years of data compared to the others (20+ years) since its fund inception was in 2013.

  • FAGIX: y = 0.00067889x-1.1781862
  • QQQ: y = 0.01455248x-57.553793
  • VFIAX: y = 0.0187493x-47.929664
  • VSMAX: y = 0.00552829x-16.365535
  • IPO: y = 0.00365101x-22.36069
  • FBNDX: y = 0.00055128x+0.1802731

Results

Using our formulas, here are our predicted quote prices for these indices after the $900 billion cash injection.

IndexPredicted Quote Price ($ / share)% Change (in %)
FAGIX11.3318.0
QQQ210.57-16.4
VFIAX297.520.9
VSMAX85.4917.2
IPO44.91-0.8
FBNDX10.3421.4
% Change has been calculated using the latest quote price available in December 2020.

Keep in mind that these quotes are simply our predictions and that past performance does not predict future results. Additionally, our model only accounts for M2 as our only input and does not include other factors however considering what has happened this year COVID has definitely impacted the M2 supply.

Let us know if you’re interested in our stock predictions and we’ll continue writing.

Leave a Reply

Your email address will not be published. Required fields are marked *