2020 was a year of massive social upheavals, perhaps none quite as explosive as Joe Biden’s victory over Donald Trump in November 2020. Biden’s presidency is expected to bring some changes on the global markets in the wake of Trump’s controversial four-year term, but what changes are on the horizon? Here are the present reactions to Biden’s victory, and what impacts his presidency could have on the global economy.
Market reactions to Biden
The initial response to Biden’s victory over Trump from the global markets as a whole seems to be a positive one- the FTSE 100 and Dow Jones stock exchanges saw significant increases in early November that they continue to enjoy well into January 2021, which can be attributed to the US election results. European stock markets such as DAX and CAC 40, as well as Asian stock markets such as the Hang Seng Index, Shanghai Composite Index and the Nikkei 225 all saw considerable jumps in early November, indicating a positive reception to Biden’s victory across the global market.
Biden’s initial plans for the economy
One big change in Biden’s economic plan compared to Trump’s is his attitude to China. Throughout his presidency and especially in the wake of the coronavirus pandemic Trump has made his opposition to China very clear, imposing trade tariffs on billions of dollars’ worth of Chinese produce. While Biden has a similar opposition to China and its influence as a major global player to Trump, his political and economic focus is, as represented in his March/April 2020 Foreign Affairs article, geared more towards efforts to “unite the economic might of democracies around the world” through economic alliances to put global pressure on China rather than through the imposition of tariffs.
The Covid-19 pandemic is obviously a huge talking point for Democrats and Republicans alike, and another area where Trump and Biden have very different economic policies.
The Trump administration has generally downplayed the impact of the virus as well as safety measures such as masks in favour of greasing the wheels of industry, and has placed more emphasis on developing vaccines and treatment of the infected than slowing infection rates across America. The upcoming Biden administration supports the development of vaccines and therapeutic treatments, but also advocates for a more active federal approach to containment of the virus, including measures such as a nationwide mask mandate.
In regards to Trump’s economic policies in the wake of the coronavirus pandemic, the Trump administration has focused on stimulus aids to government officials and businesses.
On the other hand, Biden’s focus is on the creation of jobs to empower the middle class through this period of economic hardship, with a proposed infrastructure plan to support smaller businesses.
Trump and Biden also differ on the subject of tax policy- the Trump administration’s biggest legislative achievement was the 2017 tax law, which lowered taxes on businesses and individuals while increasing budget deficits, while Biden has proposed tax increases on corporations and the wealthy to pay for social programs.
According to CNBC’s Quarterly Report for December 2020, two thirds of over 100 chief investment officers, portfolio managers and CNBC contributors who manage money polled for the report said that the first four years of Biden will be worse for stocks than Trump’s term.
However, the same survey also indicated that the Dow Jones Average is expected to hit new highs in 2021 as a result of the Biden presidency. Two-thirds of the survey respondents said the blue-chip benchmark could finish 2021 at 35,000, representing a roughly 16% gain from Thursday’s close of 30,199.87, while 5% of the respondents said the gauge could climb to 40,000 by the end of next year. On the other hand, 10% said the Dow Jones will fall to 25,000, while 18% said it will dip to 30,000.
The attitude towards Biden’s upcoming administration also varies from market to market. According to CNBC’s survey consumer discretionary, industrials and financials are expected to perform the best under a Biden administration, while utilities, consumer staples and energy could have a hard time outperforming.
Of course, any changes on the global economic landscape will be affected by Brexit for markets operating in the UK, and the UK’s uncertain economic future in the wake of Brexit means the impact of Biden’s presidency on Britain’s markets is equally uncertain.
Biden’s presidency and its impacts on the stock markets will also be affected by America’s politics- although Biden won the election, Republicans will hold 50 of the 100 seats in the US Senate, with Democrats will hold 48 and Independents caucusing with the Democrats will hold two. Biden was Obama’s vice-president, and the Obama administration was marked by Republican opposition cancelling out any significant moves from the Democrats towards an economic left.
With Biden’s centrist political alignment and the continued large presence of Republicans in the US Senate, there is a chance that the stock markets will be largely the same once the initial boosts from early November wear off.