7 Financial Implications of the Biden Administration

7 Financial Implications of the Biden Administration

Vaccines are being rolled out across the globe, Trump has been banned from Twitter, and Joe Biden is officially president of the United States. The future is looking bright. 

The 46th president of the United States has already had a groundbreaking influence on the stock market, with the S&P 500 index having the biggest gain between an election and inauguration day for a first-term president since World War II, rising by 14.3%.

But what does this mean for the economy and the stock market? If you’re wondering what the new Biden administration might mean for your portfolio, we’ve got you covered.

Clean Energy

One of the key policies under Biden’s administration is advocating for clean energy. Unlike Trump, the Democratic leader is big on climate change and has talked about his plans to achieve net-zero emission by 2050 in his election campaign. Part of this plan includes installing wind farms and public charging outlets and he’s even proposed a $2 trillion federal climate plan, sending clean energy stocks up considerably. 

Biden is also expected to quickly rescind Trump’s zealous plans for the Keystone XL pipeline that planned to bring oil from Canadian oil sands in Alberta to Nebraska, which will have a direct effect on oil prices.

Stocks in Tesla, alternative energy, and oil, are expected to perform well.

Health Care

Photo by: Gustavo Fring

Although the S&P health-care sector is up 3.8% since the start of the year, the industry is one that investors are worried will be targeted by Biden’s policies. However, with reliance on the health-care industry for vaccines, some investors doubt the industry will be subject to high pricing.

One of the biggest battles the economy still faces in 2021 is the financial toll of COVID. Not only does Biden have to handle the rising costs of battling the virus, but also the enormous damage it has caused the economy. 

Part of the way Biden’s $2 trillion COVID-relief bill, aka The American Rescue Plan, plans on tackling this is with a round of $1,400 stimulus checks. The president also says he wants to speed the administering of vaccinations and in his first 100 days of his administration he plans to reopen most schools and have 100 million vaccine doses administered.

Taxes

There are risks involved in Biden’s stimulus plans, though. Firstly, there’s the rise in taxes that Biden will have to make to pay for the stimulus program.

The corporate tax rate is currently at 21% but could move as high as 28% and there’s speculation that there will be higher capital gains taxes and an increase in the highest individual tax bracket.

Inflation

The other concern is that inflation could move higher as the economy continues to strain under the pressure from growing demands and increasing debt—however, economists see this as only a temporary problem for 2021.

With the debt from the stimulus packages, low interest rates will remain in place, meaning that the US dollar will be negatively impacted. Ultimately, this means that dollar-denominated commodities like gold will perform well.

Cannabis

Recent changes to the political landscape have meant great things for the cannabis industry. With several states legalizing recreational marijuana in November and with Biden’s victory pointing to imminent federal decriminalization, it’s no wonder pot stocks have recently soared.

Canopy Growth and Tilray surged 10%, Aurora Cannabis jumped 20%, and Curaleaf, Aphria, and Cronos have also been performing well.

Big Tech

Photo by: Markus Spiske

Although tech stocks definitely had an incredible year in 2020, with the S&P surging 14%, the industry might be slightly less lucrative for investors during the Biden administration. This is because the Democratic Party has become increasingly critical of the power tech companies possess—not only over the economy, but also society and the nation’s democracy.

Because of this, bipartisan support for regulations in the tech industry is highly likely, meaning a rise in taxes for Big Tech could be on the horizon. Consequently, since the new year, the S&P tech sector has declined 0.9%.

Infrastructure

During the 2020 presidential campaign, one of Biden’s key slogans in his campaign was “Build Back Better”. The president pledged to do so by investing $2 trillion on roads, bridges, and clean energy to “mobilize American manufacturing” and “build a modern infrastructure”. 

This means there will be a big boost in spending on infrastructure, and related stocks are predicted to perform well as these policies roll out. 

Any stocks involved in clean energy, and building roads or bridges will benefit from this increased spending—for example, steel stocks, due to their use in modernizing airports, bridges, and highways. 

Published at Sat, 23 Jan 2021 23:32:45 +0000

Posted in: News

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