15 Jan 2021
Jan 07 2021
After Trump loyalists stormed the US Capitol building, we discuss the president elect’s near-term priorities, from the pandemic to national unity.
At noon on 20 January, Joe Biden will be inaugurated as the 46th US president, only two weeks after supporters of his predecessor, Donald Trump, stormed the Capitol building, disrupting a joint session of Congress.
Clearly these circumstances, and the larger than average differences between both men, make this transfer of power more important than most. And Biden has promised an ambitious start to his first 100 days in office.
Despite the recent mayhem, the president elect’s number one priority is obvious: fighting the COVID-19 pandemic. With US case numbers and deaths continuing to rise and the vaccine rollout only just beginning, this issue will dominate the new administration’s bandwidth.
A commitment to vaccinate 100 million Americans in the first 100 days is the signature goal (in addition to a 100-day mask mandate and aim to enable most schools to reopen within this period). Success here is likely to decide how much political capital Biden will have to spend on other policy initiatives.
Biden described the recently enacted $900bn stimulus as a down payment and his new administration will be working with Congress to push for greater funding for testing and vaccine distribution. The next relief package could also include additional stimulus checks, benefit extensions and state and local government aid.
Climate policy is also likely to feature prominently; Biden has already pledged to make re-joining the Paris Agreement one of his first acts as president.
But this is generally an area where he can accomplish much before his cabinet is fully sworn in and without having to rely on Congress. Indeed, Trump’s executive orders on energy can be undone with a new executive order.
From a market perspective, any policy choices on China will be of particular interest.
Our expectation is that Biden’s approach to the world’s second largest economy will be similar to Trump’s in substance – but calmer and less volatile in style. On the most important economic topic, tariffs have now become part of the policy arsenal. We expect material tariffs to stay in place even if there is some unwinding from current levels over time.
Foreign and trade policy is another area where the president has a lot of leeway to act without Congress; there is no shortage of topics on the agenda on which Biden can quickly make a mark and reveal the direction of travel. Will he revisit the stalled TikTok deal with Oracle? How will the US respond to China’s progress on the milestones agreed in Phase 1 of its trade deal? And how will the new administration handle the many other skirmishes around tech and trade?
A wildcard not on many investors’ agenda would be a forceful response to December’s hacking revelations allegedly involving Russia. On the one hand it seems like too large a hacking attack for the administration to ignore; on the other, things appear to have gone quiet with no sign of the outgoing Trump administration increasing pressure on Russia.
While not a topic of much discussion among investors today, it is an area where the changing of the guard in Washington could also change the market narrative.
The chaotic events in Washington D.C. have added further focus on Biden’s other stated goal of bringing the country back together.
At this stage it is difficult to tell whether the riots have made achieving that goal more or less likely. The optimists among us hope that the chaotic scenes will serve as a catalyst for a coming-together moment. But the experience of the past five years suggests it is also possible that they simply remind many Republican politicians that Trump will continue to have great influence over a large part of the party’s base and broader electorate, making it difficult to oppose him.
The coming months will tell how the direction of the Republican party changes after the Trump Presidency ends, but this is likely to have medium-term implications rather than drive markets in the short-term.