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Article | 10 November 2020 | Investments
After many eventful months of campaigning, the US presidential race came to a climax on 3 November as the American public visited the polls to cast their votes.
After a close contest, Democrat candidate Joe Biden was named the winner and will become the 46th president of the United States in January 2021.
Here, we look at what the Biden victory could mean for investors.
One of Joe Biden’s key plans is to increase the corporate tax rate, partly reversing the cuts that were implemented under Donald Trump. Biden also supports tougher measures for companies that aim to pay less tax by storing wealth overseas.
Any moves to increase corporate tax are unlikely to be received well by domestic US businesses, with technology, healthcare and financial stocks most likely to be affected. However, no action is likely to be taken until the US economy has recovered from the damage of Covid-19.
Furthermore, Democrats have traditionally been in favour of stronger regulation of businesses. Tougher rules in areas such as consumer protection and fair competition are likely to be felt by the technology and banking sectors in particular.
Biden has promised to ‘Build Back Better’. He has pledged to spend trillions of dollars on infrastructure, from installing rural broadband to repairing railroads and highways. With plans to use American workers and companies to achieve this, the increased spending is likely to be positive for a host of sectors including industrials, materials and utilities.
Another key message of Biden’s campaign has been the push towards clean energy, with the aim of achieving net zero carbon emissions by 2050. The likes of solar panel manufacturers, battery developers and homebuilders will all have a part to play in his plans. And of course, there are obvious ramifications for traditional fossil fuel companies as well.
International trade rhetoric has been a hallmark of Donald Trump’s presidency over the last four years, with huge consequences for global stock markets. We expect Biden to work with China on a trade resolution, but with less of a focus on protectionism – which will be received well by Asian and emerging market equities in particular. We also expect less hostility towards other regions, such as Europe or Japan, which would be a boost for their local stock markets.
Big macroeconomic events such as the election of a new president can send ripples of volatility through global stock markets over the following weeks and months. After all, markets don’t like uncertainty. But at Architas we don’t believe this should be a concern for long-term investors.
Holding a diversified portfolio can help to protect investors’ money from short-term volatility, providing a cushion against the ups and downs of the wider markets, and potentially giving smoother investment growth.