There’s no denying that 2020 was one of the most eventful years in recent history. The most noteworthy events that have and will continue to impact the economy are the onset and management of the Covid-19 pandemic and the election of Joe Biden as the president of the United States of America. We would like to share our thoughts on how we see his election impacting the economy and how we can position ourselves to take advantage of Biden’s vision and policies that he has expressed an interest in enacting. So lets dive right in and take a look at how to invest during Biden’s presidency.
Climate Change
Biden is big on environmental protection and has made his thoughts abundantly clear on rejoining the Paris Climate accord. He also backs a proposal to spend $1.7 Trillion in the next 10 years from the federal budget to combat climate change. This could spell more tax credits for buyers of electric vehicles, subsidies for manufacturers and enforcement of stricter climate regulations. All of this makes investment in companies that are already positioned to ramp up production such as Tesla, and also accomplished ‘upstarts’ with lots of RnD money to invest in their electric division such as GM, Ford and VW, a lucrative option. Similarly, looking into companies that are helping build the support infrastructure (think charging stations, accessories etc) for these electric vehicles such as Switchback and Blink Charging, could also be good investments.
On the reverse side of this coin, Biden has vowed to ban any new fracking operations on federal lands. This will limit the expansion of some fossil fuel based companies. This means, you may want to think about re-calibrating your current portfolio. Growth in the local fossil fuel industry will be hard to imagine in the coming days.
Retail Businesses
With Covid still threatening to continue its toll on the retail industry, Biden’s intent to raise the minimum wage to 15$ an hour, won’t offer respite. With costs of operation increasing as a result, retail businesses and restaurants are set to take a hit. This would have an impact on your stock holdings of not just the obvious retail companies but also related stocks. Stocks such as REITs which hold commercial and retail properties in their portfolio could suffer losses.
Health and Pharmaceuticals
The outlook on this sector is promising as Biden will seek to consolidate the Obama Care and Affordable Care Act. With health coverage reaching out to more Americans, pharmaceuticals and their outlets stand to gain. Similarly, medical device and therapy businesses may also leap upward. The areas of Genomics, stem cells, bioinformatics and epidemiology may be prime investment options with a bright outlook.
Technology Sector
The current large players associated with the tech sector (think the FAANG club – Facebook, Amazon, Apple, Netflix, Google) may have their growth hit some stagnation during the Biden administration. This stems from the fact that Biden has proposed stricter regulation over the content posted on these platforms. This is going to cause headaches for these companies as costs for content moderation might increase. Similarly antitrust issues, the problem of net neutrality, and shutdown of Hollywood during Covid-19 – all stand to impact the tech sector.
Playing the long game
Being a savvy investor requires that you also think about the long term effects of any major event and Biden’s election is no exception. Not only must you pay attention to his economic policies but also think about his tax reforms and how they might impact you. Corporate taxes are expected to rise from 20 to 28 percent. Similarly, if you are in a high tax bracket, your taxes can rise from 37 to 52 percent. Small business and capital gains taxes are all set to rise. In the event something were to happen to Biden (his age is a big concern as he’ll be the oldest president at 78 to take over) and Kamala were to replace him, do look into what her policies might be like to prepare yourself for the future.
Conclusion
As mentioned earlier, the election of a new president for the United States of America, is a major event for the global economy. This combined with the ever changing world as it battles the Covid-19 pandemic and talks of a vaccine becoming rife, should force us all to think about the opportunities that are to be had in the coming days, weeks and months. Those of us who are able to predict the market behavior based on past lessons, will hopefully be able to better position themselves for whatever the future has in store.
Disclaimer: Like all other posts on Hustle Domain, please keep in mind that this post is for educational and entertainment purposes only and is not meant to be financial advice. Please practice caution and do your own research before investing.