ELECTION EFFECTS ON INVESTORS – PART 2

Assessing the effect of a Trump victory in November is much easier than evaluating a Biden win. Trump is a known entity and despite his unusual style, the actions he takes have been fairly predictable. Wall Street does not like uncertainty and so many investors and analysts are noticeably concerned about how a Biden presidency might affect investing.
 
The biggest issue with Biden is the high number of unknowns. With the assumption that Democrats would control the house, one would normally assume that party platform policies would be implemented. But there is nothing normal about politics these days. The Democratic party is so different than it was even in 2016, and far different than the Clinton years. There are very strong forces within the party already promising conflict. Therefore I consider it likely, based on the huge stimulus legislation already passed by the House, (still pending) that we can expect a very expensive effort to please everyone. I do not like deficit spending and would suggest owning assets likely to protect against this inflationary practice.
 
Adding to the already high level of uncertainty is the elephant in the room, Biden’s mental and physical health. A recent Rasmussen poll revealed that 59% of Americans believe that if elected, he would not fill out his first term. That is astonishing and creates enormous uncertainty about how long he would be in charge, who would be calling the shots during the period of declining health, and eventually who would take over. So assessing Biden requires one to assess Harris and the other power players in the party. This is truly an election like none other, with risks being quite high.
 
One of the bigger concerns to investors is a promised corporate tax increase to 28%. JPMorgan estimated this would shave 5-10% off corporate profits. The party has also promised to roll back the tariff and trade war with China. Like a stimulus package, this would likely be positive for investors in the short run, but it would curtail some of the current industrial return to America. Such an action would suggest investing in companies with China ties. Much of high-tech ties significant future growth to China so perhaps those recent stock surges indicate expectations for a Biden presidency.
 
Under Biden I would expect bigger government, higher deficit spending, and a return to the regulatory days of the Obama administration. The general public does not directly see the effects of Trumps’ deregulation actions, but businesses have benefited greatly from it. More regulation would be negative for investors. It would especially hurt industries that are viewed as being unfriendly to the environment.
 
In short, with so many uncertainties and moving parts, in a Biden presidency I would be more diversified, look for companies with strong balance sheets that hopefully pay good dividends, keep a healthy allocation of high tech, and be very leery of any businesses that might be a target of an aggressively “green” administration.