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, Walmart and Target. Other beneficiaries are likely to include grocery chains such as Kroger as consumers re-stock their shelves -- in particular, with products from Conagra, Procter & Gamble, Colgate-Palmolive 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 and D.R. Horton, but also building products, coatings, furniture and related companies such as Masco Corp., Sherwin Williams, Ethan Allen and, of course, Home Depot.
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, while efforts to expand overall health coverage should benefit firms like UnitedHealth.
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, Granite Construction, and U.S. Concrete USC, while the focus on solar, wind and alternative energies should bolster demand at companies such as Blink Charging, First Solar, and Sunrun. That green focus could also accelerate the adoption of electric vehicles (EVs), driving demand for Tesla and EV offerings from General Motors, Ford, Honda 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 and Aurora Cannabis. And that in turn would likely spur demand for cannabis infrastructure companies such as Scotts Miracle while spurring others like Altria and Vector Group to leverage their core capabilities and expand their product offerings into cannabis.