Stimulus Bets Help U.S. Stock ETFs Push Higher | ETF Trends

U.S. markets and stock exchange traded funds inched higher on hopes Congress can come together and hash out a new economic relief package.

On Tuesday, the Invesco QQQ Trust (NASDAQ: QQQ) was up 0.1%, SPDR Dow Jones Industrial Average ETF (NYSEArca: DIA) rose 0.2%, and SPDR S&P 500 ETF (NYSEArca: SPY) gained 0.1%.

Market observers are closely watching negotiations between Democratic leaders and White House officials on a new coronavirus aid package, but both sides remain at odds over an enhanced $600-per-week federal jobless supplement and aid for financially at-risk states and localities, the Wall Street Journal reports.

“There’s a bit of a pause if you will, as investors are waiting for confirmation on what the shape of the stimulus will be,” Lori Heinel, State Street Global Advisors’ Deputy Global Chief Investment Officer, told the WSJ. “Clearly the market is looking for another sugar rush.”

U.S. Market Rebound

U.S. markets have enjoyed a strong rebound this year after the late March lows as both accommodative Federal Reserve monetary policy and government fiscal stimulus helped fuel an economic recovery. However, with valuations stretched, the markets will require another catalyst to power the next leg up.

“A good portion of the stimulus and any likely improvement in fundamentals has been priced in and we are seeing that in stretched valuations,” Talley Leger, senior investment strategist at Invesco, told Reuters. “U.S. equities, in general, are one of the most overvalued markets in the developed world, centered on technology.”

Some are also hopeful that signs of a recent decline in new Covid-19 cases may hold up and states will be able to quarantine the spread of a rebounding virus outbreak.

“One day’s data doesn’t mean anything, but I’m looking at whether that’s the beginning of a trend,” Fahad Kamal, chief market strategist at Société Générale’s private banking and wealth management division Kleinwort Hambros, told the WSJ.

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