US  

Biden will tackle some big issues in the US

A package of prosperity?

The Biden election campaign framed their message around a ‘Build Back Better’ theme, aiming to spur growth and put the economy on the front foot in dealing with the climate crisis. 

The big number of the latest fiscal stimulus package was quick to make the headlines, but as ever, the devil will be in the detail when the second stage of his plan is announced next month. 

Climate change plans, improving public infrastructure, education and broadening access to health care (including the Covid-19 vaccine) are likely to feature heavily, but realistically will take several years to advance meaningfully.

More specifically, expect attention to focus on areas such as pollution abatement, continued development of renewable energy sectors, power generation transformation, housing, mass transit and highways, and public land use. Each of these will offer specific opportunities that investors will be able to access.

In the near term, as expected, president-elect Biden's plans have steered towards more immediate economic relief, around further cash payments to individuals, extension of special unemployment benefit programmes created earlier during the pandemic, and further aid to state and local governments. 

The pause in student loan payments are planned to be extended and $30bn (£22.16bn) in rent payment assistance for lower income households to be made available. Overall, these ought to support the economy as it struggles to get back on track.

All of this may not satisfy the more radical wing of the incoming administration, many of whom believe that the very essence of ‘capitalism’ itself requires a thorough overhaul. 

They see the current pandemic and the pending climate and biodiversity crises as allowing for a deeper ‘reset’ of our economic paradigm. At most, my expectation is that a Biden presidency will work within the existing system, but might experiment with new policies in areas such as job guarantees and wealth taxes. 

Deeper questions around ‘perpetual growth’ versus ‘planetary boundaries’ will not be answered by the 46th President, whereas well thought-out labour reforms that seek to emphasise the importance of ‘social’ in environmental, social and governance may land better.

Reasons to be optimistic

In general, investors appear to have quite an upbeat view of how the economy and markets will unfold in 2021, with a nagging doubt about an inflationary grim reaper pushed to the sidelines for now. 

A continued surge in risk assets espouses a view that low rates, quantitative easing and other direct policy measures have delivered sufficient liquidity to prevent debt being a major issue as we come out of this crisis. 

But there are known risks in some emerging markets around currency denomination and debt – and the potential for rising corporate debt defaults if activity falters – for there still to be a few clouds on the horizon.