There is a lot of uncertainty right now as to what will happen in the markets with Joe Biden as President. It is has been less than a week and we have already Biden and the Democrats start to take a very aggressive liberal stance.
Specifically, the cancellation of the Keystone XL Pipeline clearly shows that Biden cares less about losing 40,000 jobs than appeasing his liberal base. The signing of the Paris climate deal will only kill more jobs. This is huge because America needs jobs more than ever. More importantly, this is a clear turn from President Trump’s policies that were very pro-business and markets.
It is highly unlikely that Biden and the Democrats get all their legislative proposals passed because Congress is still very divided. More investment banks, like JP Morgan, are projecting a modest increase in capital gains and corporate taxes.
What is more likely to happen is increased government spending and as result, higher inflation. Even the most divided Congress will pass spending bills. We are likely to see additional spending in infrastructure, “green energy,” and more stimulus bills.
Stock markets perhaps take their cues from this saying and deliver ‘real’ or justified returns in the long run. But, in the short term, the story is different. There is money to be made and lost, based on events, situations, and individuals. Offered here are suggestions on sectors that could throw up investment opportunities as a result.
As mentioned above, the government will most likely be spending big on infrastructure because politically it is a way to temporarily boost the economy and jobs. Both political parties agree on spending more on infrastructure.
As investors, there is a lot of opportunity for investment. You can invest directly with companies or BDCs that are infrastructure-related or invest in companies that provide materials or equipment in building things.
There is a wide range of risk and reward for investors in this sector. Historically these types of stock are directly correlated to the economy. Investors need to make sure that the companies they invest in this sector are well established and funded.
Commodities & Precious Metals
Two sectors investors should watch are commodities and precious metals due to rising inflation which we think is highly likely because of the increased government debt. Inflation will most likely be kept down until 2023/2024.
Inflation will cause commodities and precious metals to rise. It is likely that gold prices will increase and as a result mining companies’ stock will as well. Investors need to cautious and perform due diligence about these types of stocks because they are generally high risk.
Commodities should increase, but if the economy goes down, then there could be a supply surplus. Investors should consider stocks that supply the commodities as they will have the
In many ways, this is counter-intuitive, since we all know that Democrats are against guns and ownership of guns. Typically, Democrats are anti-gun so that people buy guns when Democrats win right after the election to avoid potential regulation.
What this does is create a fertile opportunity for a pre-emptive strike. In other words, purchases being advanced by people interested in buying firearms, before anticipated regulation kicks in, making it more difficult, or more expensive, or both, to own guns.
Investors should find and invest in well-known gun manufactures and avoid retail stores because retail is likely to still be down for some time.
Renewable energy is a likely area of investor interest regardless of the election winner. Renewable energy can count on support from a Biden infrastructure push and one of the big proposals of during the campaign.
In the run-up to the elections, Biden has not been shy of expressing his views on what he would like to do with the energy sector. Expect some turbulence, with a few sub-sectors like renewables stealing a march over others. Some see it as a continuity of policies during the Obama administration with regard to renewable energy. But at this point, the focus seems to be clearly on renewable energy. Other parts of the energy sector may not necessarily benefit.
Investors need to be VERY cautious when investing in renewable energy companies. In my personal opinion, there are more scammers out there than real companies. In addition, many of these stocks have extreme volatility and could disappear fast.
Health Care (Pharmaceuticals)
If you thought of healthcare straight off the bat, you wouldn’t be alone. We have to thank Covid-19 for that. But its inclusion in this list very little to do with Covid-19. Health care stocks are likely to benefit because Democrats are pro-Obamacare which subsidizes health insurance and thus should be a boom to some healthcare stocks.
Healthcare could also have some losers. Right now hospitals are doing well because of Covid-19, however, Obamacare had some negative effects on them as well as insurance companies and medical device manufacturers.
Investors would most likely benefit from looking at pharmaceutical stocks of well-known companies. These companies will likely don’t be as negatively impacted as the others in healthcare.
Despite the loosening restrictions on the use of the substance by a number of states, gradually, over many years, the federal government has steadfastly been refusing to change its playbook. That could now change. The cannabis industry stands to benefit if Biden wins. Right now, most advisors and retirement plans cannot work with anyone who profits from the cannabis industry because of federal laws.
It is very possible that marijuana could be federally legalized with a divided Congress under Biden. Investors should look for well-funded weed stocks that have a system in place. Investing in weed stocks is most likely the riskiest of all sectors right now. It is very realistic to see extreme volatility and losses with even the best companies in this sector.
The tech sector has to lead the bull market for years and investors may be asking if there is more here waiting to be squeezed out or that is not factored in? The short answer is yes.
Biden has been seen as being more in favor of Covid-related restrictions. If that becomes the reality for America in the next few months, technology companies will continue to see surges in their stock price values as more and more Americans become dependent on their technology platforms to work and live.
There is going to be blowback from the censorship of President Trump and people from their platforms. However, we don’t see a major change coming for big tech because the Democrats will not likely force a change in Section 230 that protects social media.
Investors should look at stocks of companies that provide real value to businesses and individuals to help them continue to do business and live as “normal” as possible.