Election fever is over and politics can now go back to being boring but since you are here I suppose you are more interested in how the new administration’s policies may affect your investment portfolio.
So what are the Biden stocks to buy and where should you be looking to invest? What will the Biden administration mean for the US and global economy? There are a number of proposals however we have highlighted a few.
Once we see these proposals put into action, we can expect to see more investments in Impactful or Social Investing funds and you can read our article on what that is here.
The Environment
The Biden administration has set out a plan to overhaul the US energy industry by investing heavily in clean energy infrastructure alongside building new energy efficient homes. Between $2 and $3 trillion dollars will be put towards green industries and technologies.
He has also signed an executive order for the US to rejoin the Paris Climate Accord COP26 since he has committed to make the US Carbon-neutral by 2050.
Decarbonise the Power Sector by 2035
The aim here is to establish a US wide clean energy standard, reform and extend tax incentives for clean energy and energy efficiency.
Should this plan come into effect, we could see more investments in alternate energy and renewable energy companies. Companies in this sector that produce, transport and distribute renewable energy will benefit from the tax breaks and other incentives.
Companies that still operate in the traditional forms of energy like fossil fuels may see lesser demand and less growth.
Move further towards Zero-Emission Vehicles
This is a trend we have seen get stronger over the past two years especially when we look at companies such as Tesla, NIO and traditional car manufacturers who are now making hybrid versions of their petrol and diesel vehicles.
With the new administration’s plans in place, we expect to see more investment in Electric Vehicle infrastructure such as charging stations, increased investment in research and development for battery technology and aspects of the public transport systems becoming more green. The proposal also includes incentives for manufacturers who redesign their factories to produce Electric Vehicles and the eco-system around it.
As these plans unfold, we may see more people adopt electric vehicles due to improved battery technology, cost reduction due to incentives and rail companies that are focused on being greener.
Combustion engine manufacturers and their part suppliers will see a drop in demand and have a weaker business outlook.
Real Estate and Housing
The proposal is to update up to four million buildings over a four year period, making them net-zero by 2030. This encompasses the lighting, electric appliances, and advanced HVAC systems.
Part of this proposal includes improve energy efficiency by cutting carbon emission in current buildings by 50% by 2035. It includes climate proofing two millions homes over four years through cash rebates and providing financing for people who upgrade their homes.
Companies that provide insulation, heating ventilation and air condition companies including electrical companies involved in this sector should see greater demand.
Green Tech
There will be an increase in investments for research and development companies. The proposal is to invest $400 billion over a four year period in companies, projects and initiatives in order to meet to carbon goals set.
This will beneficial for companies with existing clean energy technologies which is positive news for any portfolio with these types of companies or stocks.
Taxes
The Biden administration proposed to increase corporation tax from 21% to 28% and should the proposal go through, it will have a direct impact on the market.
Estimates by Goldman Sachs suggest the increase in corporate taxes and high earners in the state could lead to a 9% decline in the value of the S&P 500 Index if the price to earnings ratio remain the same.
On Shoring
Trump had an agenda with regards to onshoring and it is set to expand under the Biden administration. The Biden administration has highlighted this as an important aspect of improving the US economy by encouraging more companies to produce locally.
Biden’s proposal outlined here highlight some detail; a manufacturing and innovation strategy as it was termed that will see incentives and tax benefits for companies which should encourage more US companies to invest in the US.
As this proposal in put in place and gains momentum, companies that have a large exposure in their supply chain internationally may be negatively impacted.
Final Note
It is important to realise there are a number of hurdles that need to be overcome and that includes various aspect of going through congress, signing executive orders and other interesting aspect of the US government system.
Should these proposals be taken onboard and implemented, one can expect to see a significant investment in clean energy including research and development, making existing homes more energy efficient and increased employment in these sectors.
Electric Vehicle manufacturers should see tax incentives as charging stations and other relevant infrastructure such as public transport (rail) plan to adopt carbon friendly measures.
Investors in clean energy funds or ESG funds that focus on environmental, social and governance should see more capital coming in as the government increases investment in companies in that sector.
There are other proposals by the Biden Administration that have not been covered and if you are interested in reading further, they can be found here.
