What to watch for during Biden's first 100 days in office
The weeks leading up to President-elect Joe Biden’s inauguration on Wednesday have been rife with tension and uncertainty, as outgoing U.S. President Donald Trump’s lingering policies and Senate trial for his second impeachment looms over the transition. Despite this, Canadian investors have a chance to seek out new opportunities in different sectors amid the change.
Martin Pelletier, portfolio manager at Trivest Wealth, said the incoming Biden presidency could bring many positives for the market, including a more stable trade environment, a stronger COVID-19 action plan, and more fiscal spending.
However, in the near term, Trump’s lingering presidential policies may hang over Biden’s first moves to stabilize the economy. Pelletier said this will leave the new administration with a larger mess to clean up and delay legislation as Washington “gets the house in order.”
Otherwise, Pelletier said investors are already pricing in a Biden presidency.
"I think the market's already looking past Trump being in the White House, and they're looking at the Biden administration and some of the potential follow from their policies to come," Pelletier said.
He pointed to the Big Tech giants as one example, and the expectation that Biden will bring a more aggressive push for antitrust cases, which could lead to policies that impact valuations for these companies.
Pelletier also described concerns around a “Build Back Better bubble.”
“There's a huge expectation of this clean tech, climate change spending that is going to cause a big dynamic market shift away from hydrocarbons towards electric vehicles, for example, and solar [energy],” Pelletier said.
“That is so much so that you've got very irrational valuations out there. You've got Tesla larger than all energy companies combined in the U.S.”
Chad Morganlander, portfolio manager at Washington Crossing Advisors, said there are still some uncertainties that investors will have to navigate.
“I think there was a curveball with the Georgia Senate race. That was unexpected. So, that provides a bit of a shift that the markets … will continue to wrestle with,” Morganlander said.
Despite reports that Biden may move to block the Keystone XL pipeline and what it could mean for the Canadian energy industry, Morganlander added that the oil sector should actually improve for Canada in 2021 and 2022, if global growth picks up later this year.
Both Pelletier and Morganlander expect that fiscal supports and inflation expectations will be key in guiding market sentiment as Biden takes the White House.
Last Friday, Biden announced that he will put forward a US$1.9 trillion economic relief package to Congress. Rob Tetrault, portfolio manager and head of Tetrault Wealth Advisory Group at Canaccord Genuity, said the stimulus will have more sway over the market than any continued tensions in Washington.
“I don't think the markets care [about the divisions in Washington]… They just seem to care about the stimulus,” said Tetrault.
“We all know [the divisions are] going to be problematic. We’re going to have a tough week here coming up. South of the border, we're going to have a tough couple months in my mind.”