Question

Assess how the current monetary AND fiscal POLICIES in the united states may impact Johnson & Johson's financial performance in the short term (the next 6-12 months). Justify the response.

Answer 1

COVID-19 and lockdown measures to contain it have plunged the world economy in recession. US has been the most affected country in the world due to the pandemic in terms of virus cases and number of deaths.

Sudden shutdown of the country, including all the businesses has dealt big blow to most of the companies in terms of fall in number of sales and profits.

However, there are one or two sectors of the economy, such as pharma and consumer goods, which are not likely to be affected negatively. In fact, pharma sales have skyrocketed leading to gains in stock prices as well as profits.

In order to revive aggregate demand in the economy, the government has announced both fiscal and monetary policies. Significant amount of money has been transferred to the affected people. The Fed has also brought down the benchmark interest rate to 0.25% per annum. Lower cost of capital is expected to allow companies to expand. However, the most worrying prospect of the economy is massive fall in aggregate demand owing to millions of job losses. However, fiscal policy of transfer payments is expected to help revive demand.

Johnson & Johnson is a multinational firm that develops medical devices, pharma and consumer goods. The company is expected to see an increase in sales, profits and overall financial performance in the short term ( the next 6-12 months ) owing to its operation in pharmaceutical sector.

The firm may increase short term production to meet higher demand for drugs and other medical devices across the country which will help deliver the company a better than expeced financial performance in this fiscal year.

The company is also developing vaccine for COVID-19 which may help the company get contracts for vaccine doses from the US government.

Overall, we may see one of the best financial performance from the company in this fiscal year.