At around 16:30 GMT on Wednesday the US will finally enter a new era. What the next 4 years will hold is anyone’s guess, but Biden would be hard pushed to leave the country more divided than it currently is. That said, his predecessor has left him with a lot of work to do. Today, we’ll briefly assess some of the potential implications of Biden’s presidency, before giving you a round-up of the top trading events this week.
The Blue Sweep
One thing that will certainly aid Big Joe in achieving his promises is the fact that the Democrats successfully snatched both the Oval Office and Congress from the Republicans.
This so-called ‘Blue Sweep’ has meant that (in theory) the Democrats now have far fewer obstacles to their plans on all fronts. A strong, unified vision is what’s needed and the Blue Sweep makes that all the more likely.
What could that bring, though? Let’s have a little look.
1. A cool $1.9 trillion rescue package
That unity will be tested almost immediately, following the unveiling of Biden’s $1.9 trillion aid package. The bumper cash injection is designed to temper the current economic crisis, the magnitude of which was again underscored last week, as the latest jobless claims unexpectedly jumped from 787k to 965k.
Joe’s Jackpot includes:
● A $1,400 payout to qualifying individuals (adding to the previously agreed $600);
● $20B for coordinating an effective national vaccine plan;
● $50B for expanding COVID-19 testing.
All in all, nearly $400B is going to go towards combating the virus.
Top analysts stated that the bill will simply be a millstone for future generations. If passed, it will certainly give the US economy a lift, but at what cost? Investors seem unsure and are willing to let this one pan out.
2. Infrastructure spending
This will likely be a hot priority for Democrats. Targeting something as tangible as construction is often a lot more politically viable than shoving money in the direction of Wall Street.
The knock-on effects that increased spending on infrastructure can have on the economy are obvious. The fact that JB already highlighted this area in his campaign makes significant expenditure here likely.
Keep an eye on the stocks of companies like Ericsson (ERIC).
ERIC stock price, 6 months
3. Clean energy
Biden has made no secret of his intention to reverse his predecessor’s decision to leave the Paris Agreement.
The US has a lot of catching up to do and Biden will certainly want to make an impact here. We can expect to see an increase in electric vehicle charging stations and/or tax credits for purchasing electric vehicles, increased backing of renewable energy sources and fossil fuel reductions.
Tesla investors, sit up!
TSLA stock price, 6 months
Clean energy stocks have taken off in anticipation of this move, with the largest clean energy ETF, Invesco’s WilderHill Clean Energy ETF, rising 250% over the past year.
4. Tech regulation
Ooh, get ready for this one.
Biden could oversee a large increase in antitrust probes coming from the Department of Justice. Companies like Facebook and Alphabet are already looking over their shoulders after similar moves by the Trump administration.
Investors should be ready for online retail, hardware, and interactive media companies to be impacted by potential tech regulation.
The mother of all U-turns
The importance of the next 4 years for the US economy cannot be emphasised enough. The actions of the Biden administration will have a knock-on effect for almost every market and investor in some way.
The mother of all U-turns is about to be attempted, while the US is going 200 mph down a one-way street. Seatbelts at the ready, everyone! It’s going to be a bumpy ride.
What’s going on in the markets this week?
We recommend keeping an eye on the following events.
● CNY — GDP Growth Rate YoY (Q4)
● EUR — ZEW Economic Sentiment Index (JAN)
● GBP — Inflation Rate YoY (DEC)
● EUR — Core Inflation Rate YoY Final (DEC)
● CAD — Inflation Rate YoY (DEC) + BoC Interest Rate Decision
● AUD — Employment Change (DEC) + Unemployment Rate (DEC)
● JPY — BoJ Interest Rate Decision
● EUR — ECB Interest Rate Decision
● NZD — Inflation Rate YoY (Q4)
● JPY — Inflation Rate YoY (DEC)
● USD — Markit Manufacturing PMI Flash (JAN)
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The Contentworks team