There are always risks for investors to navigate. Notably, this latest surge in COVID-19 cases, hospitalizations, and deaths mark a tragic phase in the ongoing global health crisis. However, as we learned in 2020, markets are forward looking. I believe the recently deployed COVID-19 vaccines, gradually reopening economies, and easy fiscal and monetary policy could provide a supportive backdrop for potentially solid gains from risk assets1 in 2021. So optimism seems in order, but given that this is the consensus view, I am only moderately bullish on global equities as of this writing.
#2: What’s your take on what a Joe Biden presidency might look like?
Investors are understandably concerned about a progressive Biden agenda. However, the president-elect’s razor-thin majorities in Congress and the low likelihood of removing the Senate filibuster have dimmed chances for proposals such as the “Green New Deal” and “Medicare for All.” That said, any major budget legislation will have to pass through reconciliation—a process that allows a simple majority to enact legislation with spending or revenue implications, but must be budget-neutral over 10 years. Major budget legislation is also likely to include another large COVID-19 relief package focused on state and local aid, further expansion of unemployment benefits, and stimulus checks for lower-income individuals. I expect higher taxes (corporate and individual) to partially offset spending as well, but probably not until 2022 to avoid choking off the economic recovery. Biden will have more unilateral power on foreign policy.