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What a Joe Biden Presidency Will Mean for Markets

Joe Biden (Joseph R. Biden Jr.) is the 46th President of the United States, taking office on January 20, 2021. Before his presidency, Biden served as Vice President under President Barack Obama from 2009 to 2017. He has extensive experience in politics, including a long tenure as a U.S. Senator for Delaware from 1973 to 2009. Biden is generally viewed as a moderate Democrat, advocating for middle-ground policies.

Financial Markets Navigate Uncertainty Amid Political Transitions and Pandemic Realities

As the U.S. braces for a presidential transition in January, financial markets remain under the dual influence of the Federal Reserve and the ongoing pandemic. Despite the change in leadership, the focus for investors remains largely the same: navigating a complex landscape shaped by monetary policy and public health crises. This article explores the key market trends and offers insights for investors in this uncertain environment.

Japanese Prime Minister Shinzo Abe resigned to undergo treatment for a chronic illness, ending his run as the country’s longest serving premier.

Key Points

  • The Federal Reserve and the pandemic continue to be the dominant forces in financial markets, irrespective of the incoming Biden administration.
  • Market strategists discard detailed sectoral playbooks in favor of a broader focus on low-growth, low-rate scenarios.
  • Bond yields experience a sharp reversal, signaling a long, uneven economic recovery.
  • Technology stocks outperform, reflecting a bearish outlook on broader economic growth.

The Fed and Pandemic: Unchanged Market Drivers

Despite the impending change in the U.S. presidency, the Federal Reserve’s commitment to low interest rates and bond purchases remains a cornerstone for investors. The ongoing battle against COVID-19 also continues to shape labor market recovery and, by extension, monetary policy. As Don Calcagni, CIO of Mercer Advisors, aptly puts it, “We’re advising clients to vote with their ballot, not their portfolio.”

Rethinking Sectoral Strategies

The initial assumption that Democrats would secure both houses of Congress has been thrown into question, leading to a reevaluation of sector-specific strategies. With key Senate races in Georgia headed for a runoff, the likelihood of sweeping policy changes affecting individual industries has diminished. This has led to market adjustments, such as the 5.8% surge in Navient Corp. shares post-Election Day, outpacing the S&P 500’s 2.2% gain.

Bond Market Repricing: A Cautionary Tale

Prior to the election, bond yields had risen on expectations of a Democratic-led fiscal stimulus package. However, these expectations were quickly recalibrated, resulting in the 10-year U.S. Treasury note experiencing its steepest one-day decline since April. This shift underscores the market’s skepticism about a rapid economic recovery and suggests a long, uneven path ahead.

Technology Stocks: The Pessimistic Bellwether

In a sluggish economic environment, technology shares have emerged as the investment of choice, with the S&P 500 technology sector posting a 9.7% gain for the week. According to Richard Bernstein, CEO of Richard Bernstein Advisors, this trend reflects “a very, very, very bearish view of the future,” indicating limited confidence in broader economic growth.

Conclusion

While the political landscape is shifting, the fundamental challenges facing financial markets remain constant. Investors are advised to focus on the broader economic picture rather than sector-specific plays. As the U.S. continues to grapple with the pandemic and its economic repercussions, a cautious and well-informed approach to investment is more crucial than ever.

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