Following the inauguration of President Joseph Biden and the installation of a Democratic-controlled Congress, Biden and his team undertake the task of enacting his action plan for the country. This is likely to include a number of executive orders but also the sponsorship of bills that should pass through Congress given Vice President Kamala Harris' power to cast tie-breaking Senate votes.
While most investors focus on the changing landscapes of the economy, demographics, consumer preferences and technology when the landscape changes in Washington as it once again will with the 2020 election cycle, a number of companies will benefit while others encounter fresh headwinds.
Let’s tackle the beneficiaries first:
President Biden recently shared his $1.9 trillion stimulus plan that proposed sending stimulus checks of $1,400 for most Americans, extending a moratorium on student loan payments and measures aimed at preventing foreclosures and evictions. Biden has also proposed a $15-an-hour federal minimum wage, more than twice the current $7.25 figure.
The combination of all these measures will likely goose consumer spending, benefitting companies that have embraced digital shopping such as Amazon (AMZN) - Get Report, Walmart (WMT) - Get Report and Target (TGT) - Get Report. Other beneficiaries are likely to include grocery chains such as Kroger (KR) - Get Report as consumers re-stock their shelves -- in particular, with products from Conagra (CAG) - Get Report, Procter & Gamble (PG) - Get Report, Colgate-Palmolive (CL) - Get Report and others.
Alongside this plan, soon-to-be established Treasury Secretary Janet Yellen is calling on lawmakers to “act big” to prevent the pandemic-riddled economy from falling into a pronounced economic downturn. This likely means the Fed will continue to keep interest rates near record lows, setting the stage for 2020’s favorable housing market to continue in 2021.
Vibrant housing demand and rising disposable income is not only good news for home building companies like Toll Brothers (TOL) - Get Report and D.R. Horton (DHI) - Get Report, but also building products, coatings, furniture and related companies such as Masco Corp. (MAS) - Get Report, Sherwin Williams (SHW) - Get Report, Ethan Allen (ETH) - Get Report and, of course, Home Depot (HD) - Get Report.
Biden will also look to ramp efforts to not only test for the COVID-19 virus but also boost vaccination efforts as well. On the testing front, that increased effort should drive business for companies such as medical technology firm Becton Dickinson (BDX) - Get Report, while efforts to expand overall health coverage should benefit firms like UnitedHealth (UNH) - Get Report.
Biden’s plan also includes building a “modern, sustainable infrastructure” and a clean energy future, which is no surprise given the Association of American Civil Engineer’s D+ rating for U.S. infrastructure. Projects that would revitalize roads, bridges, tunnels, ports and airports would drive revenue and profits at companies ranging from the likes of Caterpillar (CAT) - Get Report, Granite Construction (GVA) - Get Report, and U.S. Concrete USC, while the focus on solar, wind and alternative energies should bolster demand at companies such as Blink Charging (BLNK) - Get Report, First Solar (FSLR) - Get Report, and Sunrun (RUN) - Get Report. That green focus could also accelerate the adoption of electric vehicles (EVs), driving demand for Tesla (TSLA) - Get Report and EV offerings from General Motors (GM) - Get Report, Ford (F) - Get Report, Honda (HMC) - Get Report and others.
And sticking with green, a Democratic government is likely to continue the path to legalization for cannabis. Should that include banking reform as well, which would remove barriers to access to traditional banking and other financial handcuffs to the industry, we could very well be off to the races for companies such as Canopy Growth (CGC) - Get Report and Aurora Cannabis (ACB) - Get Report. And that in turn would likely spur demand for cannabis infrastructure companies such as Scotts Miracle (SMG) - Get Report while spurring others like Altria (MO) - Get Report and Vector Group (VGR) - Get Report to leverage their core capabilities and expand their product offerings into cannabis.
That's it from the winner's perspective; tomorrow we'll take a look at some of the likely stock market losers of Biden's presidency.