Biden and His First Term Agenda
The current state of politics has made Biden set an early theme to tackle domestic policy by working with Congress on a $1.9 trillion COVID relief package. Biden’s American Rescue Plan is filled with $400 billion for COVID testing and vaccine distribution, $1 trillion in stimulus and unemployment benefits, and $440 billion in aid to businesses. The latest package comes as the government previously shelled out $3.5 trillion last year in fiscal support.
This new package takes a non-traditional viewpoint of infrastructure by encompassing area like modernizing the economy, handling climate change, addressing racial and economic inequalities, and investments in the workforce.
The Outlook on Inflation
Higher inflation can be worrisome to investors because it may bring up memories of the Great Inflation of the 1970s and 80s. While concerns center around the rise of commodity prices or the results of aggressive fiscal policy, it seems unlikely that their will be a lasting period of higher inflation even after reinflation occurs.
During the pandemic, the surge in liquidity helped minimize financial stress while supporting growth and lifting asset price. Overall, these things did not further raise inflation.
Barring any major disruptions, the long-term expectations for inflation are that it will not become a serious issue.
Why the Global Energy Transition Matters
One of the largest global trends of our time is the energy transition, commonly referred to as decarbonization. This trend is not going to be seen just in the next couple years but will likely stay for the long haul. In the grand scheme, the economy has traditionally depended on fossil fuels and, as that diminishes, both technological and regulatory factors will push for the adoption of renewable energy.
It is pertinent for investors to conceptually acknowledge how this key trend will impact the entire energy industry, as well in related areas such as transportation, agriculture, and manufacturing.
In fact, there are nearly 300 large companies across industries worldwide who have committed to use 100% renewable sources for electricity in the next 20 to 30 years, some already accomplishing this goal.
Sustainable investing provides an array of options that are not just stocks in solar, electric vehicle, or hydrogen companies. As a matter of fact major lenders, automakers, and consumer good companies have all taken more active roles in doing their part to promote the use of clean energy within their industries.
The faster arrival of vaccines and the further fiscal support have significantly boosted the outlook for GDP growth in 2021. Growth is expected to be led by a rebound in consumer services, which had been
held down through the pandemic. Chair Powell has indicated that the Federal Reserve (Fed) will remain accommodative until the central bank is a lot closer to its goals. A moderate, transitory increase in inflation will be tolerated, but the Fed remains firmly committed to a long-term goal of 2%
(on average). Risks include a possible reluctance to be vaccinated and difficulties matching unemployed workers to available jobs.
Raymond James, “The Longer-Term Market Impact of the Biden Agenda: A Preview of a New Economy?” Investment Strategy Quarterly. Pg. 4-6,19, Web.
Raymond James, “The Inflation Outlook: What Me Worry?” Investment Strategy Quarterly. Pg. 7-9, Web.
Raymond James, “Global Energy Transition: What It Is, Why It Matters, and How to Invest in this Theme” Investment Strategy Quarterly Pg. 14-16, Web.
Raymond James. “Economic Snapshot.” Investment Strategy Quarterly. Pg. 17, Web.
Investing involves risk, and investors may incur a profit or a loss. Past performance is not an indication of future results. There is no assurance
that any forecast mentioned will occur. Expressions of opinion are as of this date, subject to change without notice and are not guaranteed to occur. Some material in this newsletter prepared by Raymond James for use its financial advisors. This information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. All opinions are those of the author and not necessarily Raymond James.