To say that the incoming Biden administration has a lot to do in the first 100 days is an understatement. Domestically, President Biden must contend with a COVID-19 pandemic and bolstering a flagging economic recovery—all while trying to govern and unify a deeply divided country.
One thing that may slow the Biden administration’s agenda is the second impeachment trial of President Trump. The process typically ties up the Senate for weeks. Before the inauguration President Biden explored the possibility of splitting the Senate's time between impeachment proceedings and speeding through his early agenda—including the confirmation of his Cabinet nominations.
Here are 6 areas the Biden administration may prioritize in the first 100 days and how they may affect investors.
COVID-19: 100 million more doses in first 100 days
The pandemic hasn't taken a break for politics and cases continue to surge in many parts of the country. Expect the Biden administration to focus their attention on accelerating the rollout of vaccines and more closely coordinating with governors nationwide.
The incoming administration has indicated that the Defense Production Act may be used as a way to get more doses of the vaccine if necessary. The stated goal is to get 100 million vaccines administered in the first 100 days. The sooner everyone is vaccinated, the sooner the economy can fully reopen and get back to full steam.
To help deal with the spread of the virus as the country waits for full vaccination, an executive order mandating the wearing of a mask on federal ground was signed on Day 1 along with another order mandating mask-wearing on public transportation, like trains and airplanes. Also expected: executive orders reimbursing states for the use of the National Guard for COVID-19, directions for Health and Human Services (HHS) to help with states' efforts to find health care workers to fight the virus, and an executive order strengthening COVID-related data collection and transparency.
Stimulus: Up, up, and away
The Georgia runoff elections, which resulted in the Democrats gaining control of the Senate, may have changed the trajectory of future stimulus bills. The Biden administration’s proposal provides for $1.9 trillion of emergency relief on top of the $900 billion stimulus bill enacted at the end of December.
The new stimulus plan includes checks to individuals for $1,400; aid for state, local, and tribal governments; and provisions to fund COVID-19 vaccine distributions and testing. Also included in the plan: relief for renters and homeowners facing possible eviction or foreclosure; expanded unemployment benefits of up to $400 per week; provisions to help reopen schools; and provisions to further help small businesses.
A proposal to boost the federal minimum wage to $15 is in the plan as well.
The aim of the stimulus is to boost the economy—the improving economy can in turn serve as a catalyst for strength in US equities. It could also support a leadership rotation to cyclical stocks like those found in the industrials and consumer discretionary sectors, value stocks, small-cap stocks, commodities, and non-US stocks.
Student loans: Relief is likely
Student loan debt relief continues to be a critical issue. "President Biden is being asked to do something about student debt forgiveness early in his administration," says Andy Vermilye, vice president of government relations at Fidelity.
In his first move on student debt, the president ordered the pause on student loans to be extended at least through September. The forbearance period on student loan payments and interest accrual began in March 2020 and was due to expire on January 31. It's expected that the administration will take further steps, including some degree of debt forgiveness.
In early December, the Democratic leader in the Senate, Chuck Schumer (D-NY), expressed a hope that the Biden administration would forgive up to $50,000 per borrower in federal student debt on Day 1. He suggested that the president could make such a move using executive orders instead of legislating through Congress but the Biden administration has indicated that legislation is the preferred path.
As of the fourth quarter of 2020, 42.9 million borrowers owed a collective $1.56 trillion in federal student loan debt.1 Rising student loan debt has been cited as one source of the widening wealth gap in the US though some experts caution that forgiving debt across the income spectrum could give outsize benefits to the wealthy.2
It's likely that the Biden administration will take further action on student debt relief, as the idea has bipartisan support, but how it's accomplished, and what the policies could look like, remain to be seen.
Clean energy and infrastructure: Going green
President Biden has vowed to rejoin the Paris Agreement on Climate Change on his first day in office. The purpose of the Paris Agreement was to lay out a plan for reducing global greenhouse gas emissions and to mitigate the global rise in temperature.
Climate change initiatives were a key plank in the Democratic platform laid out in the 2020 presidential campaign. President Biden will move quickly to get the ball rolling—for instance, the administration revoked the controversial Keystone Pipeline permit on the first day. The Keystone Pipeline project would expand a system of pipelines transporting crude oil, this one delivering oil from Canada to Nebraska.
It's expected that President Biden will sign an executive order instituting new regulations to combat climate change and promoting the effort as a national security priority. Other environmental initiatives that may get early attention include permanently protecting the Arctic National Wildlife Refuge, a ban on new oil and gas leases on public lands and waters, and new fuel economy standards for cars and trucks.
Over the long term, President Biden has vowed to invest $400 billion into clean energy and even more into infrastructure. That could mean an acceleration of existing trends, like the electrification of the transportation system, even including heavy-duty trucks. Another possibility: the increased proliferation of renewable energy in the form of solar and wind.
Somewhat counterintuitively, that could be bullish for the utility sector. "This would increase the utility sector's ability to spend capital. Utilities make money by spending money. It increases the rate base, and therefore, my opinion is that this would benefit the earnings trajectory of the utility sector," says Douglas Simmons, manager of Fidelity® Select Utilities Portfolio (FSUTX).
Regulation: Tech in the spotlight
Over the last 4 years, the Trump administration has embarked on an aggressive deregulatory agenda with a stated intention via executive order to cut 2 regulations for every new regulation imposed. It's expected that the Biden administration will likely take steps to undo many of the regulatory changes, or “rollback the rollbacks,” returning elements of the Obama-era rules and new Biden oversight to the Environmental Protection Agency, Consumer Financial Protection Bureau, Department of Labor, and others.
"For investors, regulatory friction will, over time, probably return. I do think the specter of the pandemic and the weak economy could be a check on going too fast with new regulations," Vermilye says.
Increased regulations can potentially increase the cost of doing business, so investors tend to generally view them unfavorably.
Big technology companies may be one of the targets of new regulations—given the antitrust investigations into Facebook, Google, Apple, and Amazon launched in 2020. While it may not be a top priority for the Biden administration in the first 100 days, the power of technology companies will continue to draw intense legislative scrutiny following the events in early January.
Taxes: Cuts and hikes likely
The t-word is definitely on the minds of many Americans. Given the state of the economy, a tax hike may not be on the table until later in the year.
"One thing that will get more focus: the SALT deduction, state and local taxes. The cap put in place by the 2017 tax reform has hit many of the larger states pretty hard. Democrats will make it a priority to repeal or modify that," according to Vermilye.
President Biden ran on the platform of increasing taxes on some taxpayers, including corporations and households earning more than $400,000. His campaign proposals also included a hike to the capital gains tax for those earning $1 million per year or more, and an increase to the Social Security payroll taxes for those earning $400,000 and up.
Using the budget reconciliation process in Congress, the same way the Republicans passed tax reform in 2017, it's possible that some tax changes could hit in 2021. But, says Vermilye, "I don't see a retroactive tax increase."
While it won't take effect for some time, it could make sense to speak to your tax and estate planning professional now if taxes top the list of your concerns.