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Stock markets are cautiously optimistic that the U.S. can agree a stimulus package before next month’s presidential election.

However, even if that’s the case, it will likely be a temporary sticking-plaster masking the long-term problem: unemployment.

House Speaker Nancy Pelosi and Secretary Steven Mnuchin were in talks again on Tuesday as both sides attempt to reach a deal over another substantial fiscal stimulus package before the November 3 election.

Republican senators lambasted a $1.8 trillion offer made by the Trump administration earlier this month as too large, which Ms Pelosi rebuffed as “insufficient”.

There is no doubt that bringing an end to the impasse that would permit more stimulus would provide a much-needed lifeline to millions of people throughout America.

Generally speaking, U.S. and global markets are hesitantly upbeat that a deal will be reached between both sides.

Indeed, there’s a sentiment that something will have to emerge, which is driving markets.

That said, the window of opportunity won’t be open for much longer, and no deal has been penned as yet.

Should the talks break down, the markets will of course be disappointed and there will likely be a short-lived sell-off.

Even if Pelosi and Mnuchin can get another massive stimulus package agreed, and U.S. and global markets go up, this will probably only act as a sticking plaster.

As it stands, a market rally is going to be tough to sustain because of the immense uncertainty created by factors such as the presidential election and possible constitutional crisis, as well as the mounting Covid-19 cases in the U.S. and other major economies.

Breaking through the political deadlock would help to bolster the economy and deliver much-needed money to the American people. However, the major issue triggered by the coronavirus crisis is still in play: mass unemployment, which will inevitably impact demand, growth and investment.

Therefore, a rapid rebound for the U.S. economy is improbable as unemployment claims are still on the rise.

The V-shaped recovery everyone’s talking about will be impossible with millions facing long-term unemployment.

Although it is positive that the level of unemployment in the U.S. has declined from 15% to 11% over the past few weeks, this is still the same rate as the 2008 crash.

Furthermore, a second wave of skyrocketing unemployment could be just around the corner as some support measures come to an end and savings and resources among households and businesses are scant.

What’s needed is a long-term strategy, a multi-year vision for growth and investment. This is crucial.

It’s not just about stimulus, it’s about smarter stimulus.

Nigel Green is CEO and founder of deVere Group, one of the world’s largest independent financial advisory and fintech organisations

photo: htmvalerio