What Does the New Administration Mean for the Market?
by 361 Team
January 22, 2021
The handoff has happened and ’46’ has been sworn in, so what does this mean for the market? We’ve pulled highlights from recent Weekly Research Briefings to help provide some answers to this question.
President Joe Biden gets it…
His gift of a dual victory in Georgia and a now Democratic Congress, will make it easier to increase spending for COVID aid and accelerate a significant infrastructure package of $2-3 trillion to get everyone a job.
Biden’s initial plan was for a bill under $1 trillion but he said on Friday that “economic research confirms that with conditions like the crisis today, especially with such low interest rates, taking immediate action – even with deficit financing – is going to help the economy.”
Speaking to reporters as he announced his nominees to head the Commerce and Labor departments, the president-elect said action was needed to help Americans get to the other side of the health and economic crisis, and to “avoid a broader economic cost that exists out there, that will happen due to long term unemployment, hunger, homelessness and business failings.”
Markets have reacted quickly to expectations that government spending will rise since Democrats won the Georgia elections, with stock indexes rising and the interest investors demand on 10-year U.S. Treasury bonds climbing to their highest levels since March.
The details on the first part of Biden’s stimulus plan are very targeted to helping those in need, especially families with children…
o Direct payments of $1,400 to most Americans, bringing the total relief to $2,000 including December’s $600 payments
o Increasing the federal, per-week unemployment benefit to $400 and extend it through the end of September
o Increasing the federal minimum wage to $15 per hour
o Extending the eviction and foreclosure moratoriums until the end of September
o $350 billion in state and local government aid
o $170 billion for K-12 schools and institutions of higher education
o $50 billion toward Covid-19 testing
o $20 billion toward a national vaccine program in partnership with states, localities and tribes
o Make the Child Tax Credit fully refundable for the year and increase the credit to $3,000 per child ($3,600 for a child under age 6)
How the relief will get to families…
And Janet Yellen gets it…
It will be interesting to see what new ideas she implements with the keys to the U.S. Treasury.
The nominee for Treasury Secretary urges Congress to “Act Big”…
No messing around by Janet Yellen today as she lets the lawmakers know that you don’t want to be behind this 8-ball. Better to act early, and big, than have bigger problems to deal with down the road.
Janet Yellen told lawmakers Tuesday she would make the needs of America’s workers her core focus if confirmed as the next U.S. Treasury secretary and ensure the U.S. has a competitive economy that offers good jobs and wages workers in cities and rural areas.
“I will be focused on day one on providing support to America’s workers and to small businesses, putting into effect as quickly and efficiently as I can, the relief in the bill that was recently passed, and then over time working for a second package that I think we need to get through these dark times,” she told the Senate Finance Committee at her confirmation hearing before a vote on her nomination.
Ms. Yellen said that additional spending that provides relief for struggling families and businesses could provide the most “bang for the buck” for the economy as a whole, including extended jobless benefits and nutrition assistance…
“Economists don’t always agree, but I think there is a consensus now: Without further action, we risk a longer, more painful recession now—and long-term scarring of the economy later,” Ms. Yellen said.
In addition, the new administration is also going to accelerate the vaccine rollout which will further aid the economic recovery…
President-elect Joe Biden will aim to release nearly every available dose of the coronavirus vaccine when he takes office, a break with the Trump administration’s strategy of holding back half of US vaccine production to ensure second doses are available.
Releasing nearly all vaccine doses on hand could quickly ratchet up the availability of coronavirus vaccines by allowing more people access to a first dose. It could also be a risky strategy as both Pfizer/BioNTech and Moderna’s vaccines require two doses, administered at specific intervals, and vaccine manufacturing has not ramped up as rapidly as many experts had hoped…
A transition official said the Biden team believes that vaccine manufacturers will be able to produce enough second doses in a timely fashion while administering first doses to more Americans. Biden’s team plans to use the Defense Production Act to produce vaccine materials and other supplies in order to ensure there’s enough vaccine for both doses.
And Renaissance Macro Research detailed Biden’s busy first four days and we’ve already seen many of their Day 1 and Day 2 projections enacted…
Day 1: Biden will rescind the travel ban on several majority-Muslim countries, rejoin the Paris climate accords, extend limits on student loan payments and evictions instituted during the pandemic and issue a mask mandate on federal properties and for interstate travel.
Day 2: Biden will sign executive actions focused on addressing the Covid-19 pandemic, including ways to help schools and business reopen safely, expand testing, protect workers and establish clearer public health standards.
Day 3: Biden will direct his Cabinet to work on delivering economic relief to families most affected by the crisis.
Day 4: Biden will expand “Buy America provisions,” take action to advance “equity and support communities of color,” begin to reform the criminal justice, expand access to healthcare and work toward reuniting families separated at the border.
As Blaine Rollins mentioned is this week’s Weekly Research Briefing, enjoy the markets while you can because they won’t always be so favorable—at some point the U.S. will need to put the genie back in the bottle. Until then there is nothing wrong with taking chips off of asset and stock prices that get extended this year, especially if you can take big gains under a lower tax rate in 2021, and it is not something that you want to own forever.
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