Fossil Fuel and Auto Industry Burdens to Increase Under Biden Administration
Stock Market Expected to Rebound After US Election... "Uncertainty Resolved"
[Asia Economy Reporter Minji Lee] Although interest in the stock market is rising ahead of the November U.S. presidential election, opinions suggest that ultimately the stock market will move according to the COVID-19 crisis situation and, in the medium term, corporate earnings trends and monetary policy. Since current President Donald Trump and Democratic candidate Joe Biden have different perspectives on economic and regulatory policies, climate change, and international relations, it seems necessary to continue investing in companies with higher earnings outlooks by industry.
On the 28th, Marco Werner, Head of Investment Strategy at NNIP (NN Investment Partners), stated in the report "How Will the U.S. Election Affect the Stock Market?" that “past market rises and falls were unrelated to the president’s political affiliation,” and “what matters is the economic situation at the time of administration. In the remaining half of the year, the spread of COVID-19, response capabilities, and vaccine distribution timing will have a significant impact on the market.”
If the Biden administration takes office, corporate earnings are expected to decrease somewhat. This is because the corporate tax rate is forecasted to rise from 21% to 28%. Additionally, since Biden has announced plans to invest $2 trillion over four years in infrastructure and green projects to achieve a carbon-zero economy by 2050, renewable energy, utilities, electrical and electronic sectors, and public transportation equipment are expected to benefit. Conversely, fossil fuel companies and automobile manufacturers are expected to face increased management burdens.
If Trump is re-elected, it is expected that corporate tax reduction policies will continue. Financial sector regulations are anticipated to be somewhat relaxed. This is welcome news for fossil fuel companies. From the perspective of energy, financial, and technology sector companies, more positive earnings can be expected under the Trump administration.
The healthcare sector’s outlook is not bright regardless of which administration takes office. Thorough investigations into drug prices will be conducted, and although the two candidates differ in details, both plan to amend the Affordable Care Act. In foreign policy, both candidates show a tough stance on intellectual property disputes with China.
NNIP stated, “Considering these factors, if Biden takes office, non-U.S. stock markets are expected to benefit more than the U.S. stock market,” adding, “cyclical and value stocks will outperform market returns, and although more regulations are expected in the financial sector, if interest rates rise within the levels permitted by the Federal Reserve, benefits are anticipated.” Furthermore, sustainable investment is also expected to become more active. However, the implementation of Biden’s economic policies is expected to depend on how much control he can secure in Congress. A divided Congress makes it difficult to provide momentum for policy promotion regardless of which administration is in power.”
NNIP also said, “The U.S. election is an important event that will determine policy direction for the next four years, but it is difficult to explain the stock market’s direction by a single factor. Attention should be paid to corporate earnings trends and monetary policy,” and explained, “Assuming companies will pursue profit growth next year and the Federal Reserve maintains a low-interest-rate stance for the time being, once the uncertainty of the election is resolved, the stock market is expected to show a rebound.”
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