What are the implications of a Joe Biden presidency and how will it affect your financial future?
The victory of Democrat challenger Joe Biden in the Presidential race will see a different USA to the one the world has grown accustomed to under the Trump Administration. The focus will be on countering a new surge in the coronavirus pandemic before turning towards rebuilding international relations and promoting key election promises of the Biden Campaign. The overall outcome of the election with a Republican Senate countering a Democrat President suggests a reasonable environment for share markets as more extreme policies such as higher taxes are now unlikely to occur.
What are the implications of a Joe Biden Presidency?
Domestically it is likely he will push for a more coordinated response against the pandemic. He is also likely to push for additional US government stimulus to offset a new surge in coronavirus cases. President Biden will find it challenging to push for his more radical campaign promises such as higher corporate taxes without a Democrat Senate.
Investment implications
In the near term, financial markets reacted favourably to the election outcome. The prospect of a Republican Senate reduced the risk of higher corporate taxes occurring, which should support business profits and allow for more growth in earnings and dividends as a result.
In addition, it is more likely that we will get some form of stimulus, which will be important in supporting consumer spending as the US grapples with growing coronavirus cases. Stronger consumer spending feeds into business profits and is a net positive for businesses, helping to support the share market.
One area that may feel the pressure is that of bond returns. A new stimulus program would mean stronger economic activity which usually sees bond prices fall as investors anticipate higher interest rates sooner. The positive Pfizer vaccine trial in recent days accelerated this move as it makes it more likely the world can “go back to normal” sooner, hastening the economic recovery.
Lastly, one lurking risk is greater regulatory scrutiny of US businesses. This could mean more regulation for large technology companies such as Facebook or Google. Rising compliance costs and other restrictions may see share prices fall or lag the broader market. Importantly there is a lot on the enforcement front a Biden Administration could work towards even without new laws being passed. One example of what could happen is already underway with an antitrust case by the Department of Justice targeting Google over monopolies in search and search advertising in recent weeks.
Grow and protect your capital
At WLM Financial Services, we feel that it is important to have an active (dynamic) investment philosophy rather than a passive, set and forget approach. The benefit of a dynamic investment approach is its greater ability to provide capital protection and lower volatility.
WLM has three decades of helping people achieve their goals. Our experience in working with investors and managing their investments has led us to conclude that a Goals Based Investment approach provides for superior outcomes. The strategy and results are easier to understand, and investors find it more comfortable to live with.
Today, the effects of the COVID-19 recession along with political and social instability in the US has created a challenging and uncertain environment for investors. WLM is here to help you navigate this and to design approaches designed to secure your financial future. To find out more about WLM Financials' investment advice and Financial Planning services, please contact us.
