Marc Cuniberti What will a Biden market look like and how might it be different had Trump been reelected?
There would likely be similarities and differences no matter which way it went.
Both men believe in heavy spending and Trump utilized the full power of the printing press and the debt markets. The U.S. deficit skyrocketed under Trump even before CoVid-19 hit, and CoVid only exasperated the spending.
Under Biden, it is widely assumed spending will accelerate. Although Trump broke many spending records, Biden may blow those sky high addressing CoVid and the ailing economy with massive new programs.
Should CoVid continue to spread ferociously as it has been, the printing presses at the Fed (Federal Reserve) will be likely be on steroids.
As a general rule, historically democrats advocate a looser fiscal policy stance than republicans. In recent decades however, both parties seem to have little concern about opening up the government check book.
The two mechanisms the government can fund spending and therefore accomplish economic stimulus is through fiscal and monetary policy.
Fiscal policy comes directly from the government in the way of tax regulation and spending programs like direct stimulus payments, infrastructure and other social assistant mechanisms.
Monetary funding is accomplished by the Federal Reserve (a private corporation run by a government agency called the Board of Governors) through interest rate manipulation, the debt markets, easing reserve requirements and other systemic operations that center around debt and outright currency creation and application.
Under Biden, both monetary and fiscal policy is expected to accelerate.
With a CoVid ailing economy and no end in sight to the shutdowns and scale backs, many businesses and individuals alike are bleeding red. Only massive amounts of government assistance will provide any semblance of normalcy to our economy. Whether amassing massive deficits is the long term solution for a sound economy is a story for another day
Sectors likely to benefit from Biden are anyone’s guess but there are some common beliefs as to where the money will go.
Many believe government sponsored infrastructure programs will offer the job creation benefits so badly needed. Companies tied to construction and all its related conduits may be considered.
Healthcare may benefit from a renewed sense of urgency to fix the existing problems with the Affordable Healthcare Act (ACA) and those consumers stuck in between the public and private options.
Tariffs on foreign goods are expected to be rolled back under Biden and foreign markets are already reacting to this assumption.
Bonds, which are just another word for debt, may sell off should the stock markets scream upwards, as investors opt for higher returns from stock growth in a rising market. There will also be a massive amount of debt that the U.S. will need to sell to fund its activities. More debt for sale means higher interest rates. Subsequently bonds may react negatively and sell off as bond prices and interest rates move opposite of each other.
Green energy may do well under a Biden administration. Hydrocarbon endeavors may or may not suffer as increased demand from spending projects and increased activity may partially offset the move to alternative energy and away from oil.
Sectors at risk under Biden might include financials as he attempts to placate constituents and their disdain for big banking.
There is also Congressional headhunting taking place targeted towards the largest corporate players both in social media, high tech and online retailing. Although many believe it’s mostly rhetoric, any serious talk about breaking up the large conglomerates will likely put pressure on these companies.
Many cross currents will be at work as the new President takes office so predicting anything for certain is a fool’s game. Should CoVid continue its rise in infections, further shutdowns could slow or halt economic improvement.
No matter which way it goes, massive amounts of money are likely destined to by showered down on the public and private economies.
The typical outcome of that is inflation. Should inflation rear its ugly head, inflationary hedges like precious metals and other historical inflation shelters may see their day in the sun.
In conclusion, if we have learned anything in the year 2020, it’s that anything can happen. And in 2020, it has.
Keep in mind, whenever we think we know what the market will do, it is famous for not cooperating.
Opinions expressed here are opinion only, and not those of any bank or investment advisory firm. Nothing stated is meant to insure a guarantee of any kind, or to be construed as individual investment advice. Neither Money Management Radio (“Money Matters”) nor Bay Area Process receive, control, access or monitor client funds, accounts, or portfolios. California Insurance License #0L34249. Insurance services offered independently through Marc Cuniberti and not affiliated with any RIA firm or entity.
