How Will The Biden Agenda Affect Stocks and Interest Rates

How Will The Biden Agenda Affect Stocks And Interest Rates

Joe Biden has been the president of the United States for close to a month now, and it’s already abundantly clear that this administration has very different economic and political stances to its predecessor, which could affect stocks and interest rates.

In fact, President Biden has already signed a number of executive orders to reverse several key moves made by the Trump administration, and we can expect other similar moves over the coming months.

What Economic Policies Can We Expect From Biden?

President Biden’s immediate focus has been on tackling the coronavirus-induced economic crisis. He has already proposed a $1.9 trillion relief package that aims to help unemployed Americans get through this difficult period.

Additionally, the package will contribute to funding the nation’s vaccination rollout and provide state and local governments with additional funding to handle the economic fallout of the pandemic.

Biden is also expected to propose another package next month which will focus on aiding jobs creation and growth and facilitate investment in numerous infrastructure projects.

Aside from this, the Biden administration has already made clear its plans to invest in renewable energy and further incentivize growth in this area, though a concrete plan hasn’t been laid out yet.

And on a broader note, analysts expect the Biden administration and the now Democrat-controlled senate to increase fiscal spending across the board.

How Will This Impact Stocks and Interest Rates?

The prevailing expectation from economic analysts is Biden policies, particularly the forecast increased fiscal spending, will drive increased economic growth and lead to higher interest rates.

For instance, following Biden taking office and the Dems gaining a majority in the Senate, Wells Fargo Investment Institute increased its forecast for economic growth and its interest rates projection in the short and medium term.  

Specifically, Scott Wren, a Wells Fargo senior market strategist, noted that they revised their GDP growth forecast for 2021 from 3.8 percent to 4.7 percent. 

The stock market is also expected to benefit from his policies, though, ultimately, developments related to the COVID-19 pandemic are likely to continue to be the main force acting on stock indices.

“The economic numbers have been coming in better than expected… The vaccine logistics and news has been better than expected. We’re not expecting these lockdowns in states like California and New York to go on endlessly,” Wren said.

Meanwhile, Ed Keon, chief investment strategist at asset management firm QMA, said the market is expecting a rebound in stocks in the second half of 2021, but the passing of a significant stimulus package by the Biden administration would certainly boost market prices even further.

“The huge rally we had suggests the market is looking past the virus, but the degree of the recovery of the economy is not a sure thing yet. Everybody expects a rebound in the second half. The question is how strong will it be. If you get a big stimulus package on top of the last stimulus package we got, that rebound could really be much stronger than expected,” Keon said.

A Quick Summary

  • The Biden administration’s immediate focus is on tackling the economic fallout caused by the ongoing COVID-19 pandemic.
  • A $1.9 trillion relief mega-package has already been proposed, and another package focusing on jobs creation and infrastructure investment is set to be proposed in March.
  • With Biden in the White House and the Dems gaining a very narrow majority in the Senate, fiscal spending is forecast to be very high in 2021.
  • This has led to many analysts increasing their projections for economic growth and interest rates.
  • Joe Biden’s presidency is also expected to lead to the accelerated growth of the renewable energy and cleantech sectors.
  • As for the stocks, analysts are expecting a significant rebound in Q3 and Q4 – and Biden’s relief packages should further aid the stocks’ recovery.