Lawmakers voted to approve a long-awaited virus relief package, offering funds to help support many of the individuals and businesses hardest-hit by the coronavirus pandemic. Greg Valliere, Chief U.S. Strategist at Toronto-based financial services firm AGF Investments, joins Yahoo Finance Live to discuss the implications of the bill.

Video Transcript

MYLES UDLAND: We begin this morning with the latest out of Washington, where lawmakers have passed that $900 spending bill. And joining us now to discuss is Greg Valliere. He is the Chief US Policy Strategist over at AGF investments. Greg, great to speak with you this morning.

Let's begin our conversation by just talking about the process between the end of July and last night, when we finally got additional stimulus through, if in the end, this met, exceeded, was below your expectations of what it seemed the economy needed after the CARES Act was passed back in the spring.

GREG VALLIERE: Yeah, it was quite a dysfunctional stretch of six months or so not being able to get anything done. I think you've got to say the bottom line is that a first quarter recession has diminished as a likelihood. But it's not totally dead. I think the second quarter is going to need some help as well. So I'm in the camp that would argue that it wasn't enough, and we're going to need more.

JULIE HYMAN: Hey, Greg, it's Julie here. So are we going to get more, I guess is the next question. I mean, what can we extrapolate from what looked from the outside like a very messy, contentious process to even get this bill done? And obviously, there will be a new Congress coming soon. But what can we sort of surmise about what the process is going to look like?

GREG VALLIERE: I think, Julie, in a nutshell, it all depends on Georgia, on the runoffs. If you get the Democrats winning both seats, we'll get a pretty good sized stimulus bill, because the Democrats will control the Senate. If the Republicans win one or both, we'll get a very modest stimulus bill. But I think there still are things that need to be addressed.

Unemployment benefits, for example, expire on March 14. You've got no resolution on state and local government aid. And you've got no resolution on liability protection. So I do think there's enough there to come up with a bill. It's not going to be a blockbuster. But it may be enough to get us through the second quarter. And by then, hopefully, the vaccine will be doing its thing.

BRIAN SOZZI: Greg, let's stay on what's not in this bill. What's not in this bill is $120 billion for the Restaurants Act. Why can't lawmakers agree on something like that? Essentially, the government is going to put out of business thousands of more restaurants.

GREG VALLIERE: Yeah, it's inadequate in many respects, you've got to say. It sounds crazy to say $900 billion is not a lot. But it isn't. I think there was a need to do quite a bit more. Even the checks that are going out are pretty modest, in my opinion. So that's why I think, you know, as we get well into March, maybe first part of April, we're going to need more medicine.

JULIE HYMAN: And Greg, as you know, even though the stimulus didn't get passed until now, hasn't seemed to slow down the market rally, because participants were anticipating this was going to happen. Do you see anything going into next year, particularly as we get more penetration of vaccines, do you see anything related to further stimulus package that could derail the rally?

GREG VALLIERE: Yeah, you got to say the market right now is pretty much priced to perfection. You'd have to hope that the so-called variant coming out of the UK is not going to be really, really virulent. I think you've got to hope that the economy does not slide into recession. I don't think it will. But again, with a market this well-priced, you've got to worry about that by late March, this economy could be sliding again.

MYLES UDLAND: You know, and Greg, thinking more broadly about the fiscal impulse, I guess we could say, from the US government, we've now seen a couple of trillion dollars, 2 and 1/2, really, sent out the door this year in terms of spending. It has helped the economy greatly. I think consumers really like getting a check in the mail for, whether it's $1,200, $600.

Does this set, in your view, the government on a different trajectory into the next decade of being more willing to do deficit financed spending in a way that the 2010s have really defined by an austerity impulse after the crisis?

GREG VALLIERE: It's a really good question. And I would say that there's the very likely chance that the Republicans will suddenly find religion. They had no religion for the last four years on deficits. But now I think that McConnell and other Republicans will say, that's it. We spent too much money. We can't spend this kind of money anymore.

I think that mentality is going to be dominant among Republicans in both houses, so to get a big, huge $1 trillion plus package I think is unlikely. But I do think we could get a $400, $500, maybe even $600 billion package in late March. But the days are just enormous spending are about to come to a close.

MYLES UDLAND: And then related to that, Greg, there's some language in this latest bill with regards to the Federal Reserve, what it can and cannot do in future emergencies. Now, Republicans say this is a big deal. Democrats say it's fine. 13.3 3 is not really going anywhere. But do you see fights around the Fed's independence, again, another feature of the mid-2010s, do you see that maybe coming back as we go forward here?

GREG VALLIERE: It certainly was a shot across the bow by Toomey and others. I personally thought the final compromise was pretty artful. Yeah, the Fed can recreate some lending facilities, as long as they're not exactly the same as the two that Treasury has taken back. So to me, there's enough wiggle room in there. And of course, you have a Fed chairman who's determined to keep the funds rate close to 0 for three more years. So I think the Fed will be plenty accommodative, even though the was that shot across the bow by some Republicans.

BRIAN SOZZI: Greg, Myles mentioned the stimulus checks that households and consumers will be getting. Do you think the checks are enough that these consumers will go out, take their checks, and they'll buy new clothes at department stores, and consumer spending will come on strong in GDP rallies? Or do these checks simply plug a hole?

GREG VALLIERE: I think a lot of people have to pay rent. A lot of people want to buy food. Yeah, sure, there could be some purchases at department stores. But I think the basic necessities are more crucial here. And I think because of that, we're looking at a very mediocre first quarter. But again, as I said at the beginning, the good news is the first quarter, I think, will not go into recession because of this bill.

MYLES UDLAND: All right, Greg Valliere with AGF Investments. Greg, always great to get your thoughts. Thanks so much for joining us. Have a great holiday and a Happy New Year.

GREG VALLIERE: Happy Holidays. Thanks.