A new coronavirus stimulation agreement is still being made between Democrats and Republicans, as they cannot agree on a conclusion.
Industries from fossil fuels to pharmaceuticals can feel the impact of the Biden-Harris administration.
But first, it’s important to understand the limits of what the Job Biden President can do. A potentially divisive Congress would limit his ability to roll out large-scale fiscal stimulus plans, tax cuts, healthcare and climate law, analysts said. Analysts say.
Jim Baird, chief investment officer at Plante Moran Financial Advisors, an investment advisor, said: “The possibility of conducting extensive wellness reform or major regulatory action against Big Tech, energy or sector the financial sector will decrease significantly.
In theory, certain industries could benefit from one or the other winning. Under Biden’s presidency, renewable energy, infrastructure and supply affected by trade policy will benefit.
But factors other than Washington can affect the way industries operate.
For example, the two sectors that performed best and the two worst sectors were the same under President Barack Obama and President Donald Trump, according to SunTrust Private Wealth Management. Technology and discretionary consumers both posted double-digit returns during both their presidencies, while finance and energy were the two worst performing sectors.
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After the most recent presidential election results, the consensus is that finance, energy and small caps will work well, but each is inferior to the S&P 500.
Here are potential areas and industries where analysts forecast could perform better and those that are ready to face the challenge in the Biden-Harris administration:
According to investment firm Raymond James, in a split Congressional scenario, with the Republican Senate and the Democratic House of Representatives, technology stocks would work best with the Biden administration.
Analysts say that a divided government means minimal impact on the sector. The legal risks for major technologies may continue to rise slightly, but experts say they are controllable and that it may take years to resolve.
Analysts do not believe that Washington has much desire to pursue antitrust laws or new specific technology laws. Instead, it seems that politicians may be waiting to see how antitrust investigations unfold.
According to UBS analysts, Biden’s presidency with a split Congress is the best short-term outcome for health care.
Significant changes to health care policy or drug prices now appear less likely without the Democratic green wave, analysts say. Stronger Democrats’ policies on drug pricing and public health insurance options are unlikely to pass the GOP Senate.
Moderate drug pricing laws are still possible, according to UBS, but the possibility of bipartisan compromises with any health policy law is less than 50%, according to UBS.
While the Biden victory will likely increase spending on infrastructure, analysts predict that a divided government will likely reduce the size of any potential program. Analysts at UBS expect spending on infrastructure to focus more on traditional projects such as roads, bridges and overall construction.
Biden’s green initiatives will likely face more opposition from a divided government and will likely shrink – if they are funded. This scenario will be positive for machinery, construction materials and construction and engineering companies, but negative for stocks of climate, alternative energy and green technology companies. given how well those stocks have been performing lately, UBS analysts said.
Industries and materials
Biden’s victory and the split Congress were positive for both industries as trade tensions are likely to ease, with no risk of tax hikes, and less regulatory pressure.
The railroad, defense and waste industries will benefit from lower rates of tax increase, analysts say. Defense firms will also benefit from the lower risk of defense spending cuts. Construction, building materials and alternative energies will suffer from less spending on green infrastructure and technology, analysts say.
Consumer discretion and consumer staples
According to experts, consumers are ready to benefit from another round of stimulus measures, even with a smaller package compared to the green wave scenario. Historically low interest rates will help improve housing and home stocks. Wealthy consumers will benefit from a much lower possibility of a tax increase.
The energy outlook is still uncertain. It has been one of the worst performing sectors in the past decade, largely due to the low prices of crude oil and natural gas. Analysts expect some volatility until the uncertainties, mainly related to the oil price outlook, ease. According to analysts, most of the energy risks will come from regulatory policy rather than parliamentary action.
Oil and gas industry regulations are likely to increase, but it will take a long time. Many states rely on substantial revenues from oil and gas production – a fact that could make industry constraints more difficult under current economic conditions.
However, renewable energy including wind and solar could be the biggest win-win energy, according to UBS. Meanwhile, natural gas will remain an important bridge fuel and a relatively cleaner alternative to coal for US electricity generation, which will limit the risk.
Fossil fuel-attached energy stores have been underperforming in the vast market recently. While there are challenges for the energy sector, any of Biden’s efforts for sweeping change could be limited given the weak US economic state.
Analysts say a win for Biden and a divided Congress is mixed and slightly negative for finances. The next stimulus package is likely to be lower than in the case of the green wave, which weighs heavily on interest rates.
Bank stocks are sensitive to interest rate changes. But this is partly offset by a lower possibility of a tax increase.
The regulatory risk would be reduced somewhat if the Senate remained in the hands of the Republican Party. However, analysts expect that the Biden administration can appoint a new management board that can interpret laws and regulations in a less industry-friendly way.
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