Last week, the U.S. government enacted the Coronavirus Aid, Relief and Economic Security – or CARES – Act, totaling roughly $2.2 trillion of rescue and support, the largest spending bill in history. For perspective, that’s more than three times the outlay for defense spending in 2019 ($676 billion) and equal to roughly half of total federal spending last year ($4.45 trillion).So where is all that money being allocated?

The biggest slices of the pie are going to:

  • Loans to large businesses and local governments ($504 billion)
  • Assistance for small businesses ($377 billion)
  • One-time checks to individual taxpayers ($290 billion)
  • Business tax cuts ($280 billion)
  • Expanded unemployment benefits ($260 billion)

The CARES Act should not be thought of as fiscal stimulus but as an economic stabilization package. The collapse in economic activity in March 2020 is not a normal cyclical recession but is the result of a mandated “time out” of individuals and businesses by government. Many of the provisions of the Act are designed to prevent the private sector from unraveling so that when the containment of the virus permits shutdowns to be lifted, activity can bounce back.

There is no avoiding recession because the output of airlines, hotels, restaurants, movie theaters, etc. has been halted.  However, the new federal programs will support many businesses so that when the virus permits the resumption of activity, we can see a sharp rebound in the economy.

The support for businesses is really support for labor because if companies cannot pay workers from cash flows, the layoff figures will dwarf the latest jobless claims data, risking longer and more permanent damage to the economy. 

The hope is that the combination of fiscal and monetary initiatives will enable the economy to get over the covid-19 recession hump.

As of this writing, the President and House Speaker Pelosi were already discussing additional measures that the government might take, including a $2-trillion infrastructure bill. This is an indication of both how severe the contraction might be in the second quarter and also of how the government seems prepared and willing to do whatever it takes to bridge the gap. 

Tony Malloy is Executive Vice President and Chief Investment Officer of New York Life, responsible for the management of the company's assets. Tony is also the head of the firm’s global asset management business, which manages over $575 billion in fixed income, equity and alternative investment strategies for insurance, institutional and retail clients. He is a member of New York Life’s Executive Management Committee and serves on its Risk Steering Committee. Tony earned a BA in English and Economics from Middlebury College and an MBA in Finance from New York University. He serves on the board of trustees of Good Shepherd Services.


All opinions and data included in this market commentary are as of 4/2/2020 and are subject to change.  The opinions and views expressed herein are not intended to be relied upon as a factual prediction or forecast of actual future events or performance or a guarantee of future results or investment advice.
All investments are subject to risk, including loss of principal. Past performance is no guarantee of future results. Investors cannot invest directly in an index. 
The information contained should not be used as the sole basis to make any investment decisions.

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Media contact
Sara Sefcovic
New York Life Insurance Company
(212) 576-4499

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