April 24, 2020
The $2 trillion CARES Act this past month is the largest stimulus package in American history. And the money’s being spent in a few different ways.
Some of it is very targeted, such as the $150 billion Relief Fund that is going straight to hospitals to help them cover the costs of treating patients. Most hospitals today are running at an operating loss and lose money on each Medicare patient they tend to. Healthcare spending is a political topic, but I believe this crisis will be a wake-up call that hospitals need more economically-favorable government policies, regardless of which party is in office.
Other spending is intended to mitigate unemployment, such as the Paycheck Protection Program helping small businesses cover 8 weeks’ worth of employee payroll. This is the government providing a safety net, to cover the labor costs of businesses for a couple months. But even with it, I still expect companies will be more hesitant to hire full-time workers for several more years. This could lead to more contractors, working remotely, who take on side-gigs to get up to 40 hours per week. We could see a swift acceleration of the ‘gig economy.’
And in my opinion, the most interesting piece will be seeing how the ‘Economic Impact Payments’ of up to $1,200 per adult and $500 per child get spent. Will it be primarily to cover necessities like mortgages and groceries? Or will it be used for more discretionary purchases like online shopping? Either way, 70% of America’s GDP comes from consumer spending. With government funding temporarily simulating the economy, it will be interesting to see how and where the money now flows.
As potential winners who arise from these above-mentioned trends, HealthEquity (Nasdaq: HQY), Upwork (Nasdaq: UPWK), and Atlassian (Nasdaq: TEAM) are all companies on my investing radar right now.
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