With the election result all but sealed, we look forward to see what the incoming presidency of Joe Biden means for global investors. These are my initial impressions and research notes, not intended to be a political commentary, rather an anticipation of markets and investment trends:
- Taxes: The is the most obvious. We’re likely to see concessions wound back and some investment related tax breaks unwounded for wealthy investors. An increase in corporate tax will take time and not yet a dampener for the stock market, because…
- Stimulus: We’re likely to see something in the order of $2–3tn in fiscal stimulus which, on top of record low interest rates, will fuel stocks even further. Stimulus will be more immediate, tax is a difficult issue, so that might take some more time and become a problem for another day.
- Commodities: Bans on fracking and a push on renewables will probably see the US reduce its energy production, reducing supply and possibly providing some price support for oil and other commodities in the medium term. What happens to energy in the medium term is still up in the air. Too hard to tell. I understand that Biden’s official policy isn’t to ban fracking and to regulate it, so I’m jumping the gun and assuming the worst case here.
- Real Estate: Real estate prices move in the opposite direction of interest rates, so rising taxes, stimulus spending and higher commodity prices could see a big change in real estate expectations in coming years, which will flow through to real estate prices. In the meantime, cheap money will support and downward pressure from Covid related disruptions.
- Tech Regulation: The big test. If Biden follows through with plans to regulate big tech, we could see stock prices in tech companies fall over the medium term and investors rotate back into the “real economy”. Could see the end of many cheap-debt fuelled BS businesses which have recently been propped up.
- Trade: The US-China tensions will most likely ease, yet UK-US relations might not be as straight forward. Trump’s tariffs have actually helped protect American jobs, at the expense of global free trade. Unwinding this will be sensitive. Too hard to tell at this stage as a lot of politics goes into these things. Can’t get worse than what we are, or can it?
I’ll write up more in the coming weeks as I meet and talk to some of my expert contacts in the markets. In the meantime, subscribe to the podcast to get my weekly insights on a range of investment topics.
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