Saxo Bank har udarbejdet de vigtigste 10 prioriteter for præsident Joe Biden. At bekæmpe coronaen har absolut førsteprioritet. Det kan føre til et økonomisk svagt første og andet kvartal, men så kommer der gang i væksten i andet halvår. Biden vil sikre social stabilitet med bred økonomisk støtte. Han vil satse på grøn energi, men mere i ord end handling. Der bliver reguleringer af internet-giganterne. Biden vil ikke gøre meget ved skattepolitikken. Politikken over for Kina bliver ikke ændret meget, men Taiwan kan blive en test. Der kan blive mere pres på Rusland, men det vil teste forholdet mellem USA og EU. Mellemøstpolitikken bliver præget af nye Iran-forhandlinger. Forholdet til EU bliver bedre, men der ligger også konflikter og lurer.
The Joe Biden Presidency: Top Ten policy priorities
Summary: Joe Biden becoming the 46th president of the US marks the end of a remarkable four years of Trump and will bring a pronounced change of presidential style, if not a complete change in some of policies initiated during the Trump era. In this post, we run down ten top policy priorities for the incoming Biden administration, five domestic and five foreign, as 2021 is set to be a volatile year, especially once we get to the other side of the Covid pandemic.
Biden’s domestic policy agenda
1. Killing Covid: Job One from Day One
Biden’s most important job from “Day One”, as he likes to say, was always to come out swinging in fighting the Covid crisis, appealing for the 100 days of restrictions and mask-wearing he has promised in order to allow the roll-out of vaccines time to start winning the race against new, more contagious Covid variants as well as mortality and the overall strain on US hospitals. Biden will likely mount an enormous federal push to establish vaccination centers nationwide in coordination with state authorities. Ensuring a fair and rapid distribution of the vaccine to everyone will be critical for establishing any popular mandate beyond the first half of this year. If the vaccine effort succeeds this could mean a weak Q1 and early Q2, but a likely boom for the second half of this year.
Such a scenario could see wildly diverging performance for our themed equity baskets, as our “misery index” stocks linked to energy, travel and leisure at first soar, as do value stocks relative to growth on rising inflation, but with everything risking a rough ride if inflation spikes too aggressively later this year.
2. Social stability: in the driver’s seat
Modern cycles of bailing out the economy when it dips into a recession have tended to focus on the financial markets. But the Covid recession is different because inequality is greater than ever and the traditional policy response to keep financial markets functioning has only aggravated inequality, as small businesses fail and tens of millions of especially low paying jobs were lost. This time, stabilizing the economy will mean stabilizing society to prevent whatever passes these days for an armed insurrection – and we have seen glimpses of what this might looks like in 2020 and in the Capitol Hill riots two weeks ago.
Above all, the Biden administration will focus in this area on a safety net for the most vulnerable through prevention of evictions, raising the minimum wage and increasing medical coverage and lowering health costs. Inevitably, raising the minimum wage quickly will price some low wage jobs out existence, which will require more income support for the out of work – so we could potentially see a continuation of what has amounted to the introduction of a de facto Universal Basic Income (UBI) via stimulus checks.
3. The climate agenda: taking it easy
While climate ranked high during the campaign season and was particularly aimed at satisfying the progressive wing of the Democratic party, virtue signaling will be the name of the game more than heavy spending for the balance of at least 2021. The $7 trillion Green Tech Infrastructure idea that Biden campaigned on will not pass a thinly divided Congress. But green spending will be on the agenda and will come out of the general budget and only add to inflation risks, both by undercutting investment in cheaper fossil fuel energy and because green energy infrastructure is very expensive to build out. But look for popular pushback against the green agenda in 2022 if, as is likely, that underinvestment in black energy (fossil fuels) results in hefty price rises for consumers, who will still mostly still be driving petrol-powered cars. Never underestimate the impact of the retail price of gasoline on the American psyche.
4. The big internet monopolies: regulatory fangs for the FAANGs?
Monopolies extract far too much excess profit from an economy, far beyond any productivity they ever provided in the bargain. They have no grown to world-eating monstrosities as 2021 gets under way. Increasingly, both of the US political parties are recognizing this and are ready to do something about it. A bipartisan committee in Congress in 2020 made significant findings that cast a negative light from lawmakers on the major infotech companies, and the US Federal Trade Commission and multiple state attorneys general have already filed a case against Facebook.
2021 will be the year when US regulators finally start to catch up with the threat these monopolies present to the economy, other businesses and even social stability. Stricter regulation on content, breaking up and disintermediation of their use of user data could all be on the agenda. As the top handful of companies has provided the majority of the growth in US equity market cap in recent years, the implications for US-bound investment are vast.
5. Taxation: hitting the snooze button
With the urgency of the pandemic and virus response this year, the issue of tax policy will take a back seat for the Biden administration for at least 2021, even if Biden campaigned loudly on rolling back some portion of the Trump tax cuts for corporate America and other tax reforms that he vowed would only hit the top 1% of income earners.
Biden’s foreign policy agenda
6. China relations: Change of style more than substance
An increasingly anti-China stance is a bipartisan phenomenon in the US, and Biden may roll back very little, if any of the measures Trump enacted against China, from the Trump administration’s banning Chinese telco equipment maker Huawei from selling its tech in the US and generally demanding its national security allies do the same, to moves limiting funding of Chinese companies listed in the US due to auditing standards and purported links to the military.
Of course, the style of communication with China will be very different for Biden: don’t expect brash tweets threatening sudden tariff moves or Biden’s great personal affinity with Xi Jinping. Rather, expect a slow tightening of measures like the ones already established that will deepen the divide between the two countries, make it clear to US companies that they will need to scramble to find alternative sources of production outside of China.
7. Taiwan: a global tech lynchpin
Taiwan is a global economic pressure point as it is the only place where chip fabs are able to produce the most high-end chips in volume, and is responsible for fully half of global semiconductor output and a staggering 90% of the most advanced chip production, by some industry estimates. It is also a geopolitical pressure point at the heart of the ongoing face-off between the US and China over tech dominance, after the US moved to prevent some Chinese companies, particularly Huawei, from taking delivery of chips containing US technology, even if manufactured in Taiwan or elsewhere.
How will China deal with this challenge, when it has so far failed to produce its own fabs and its key companies are reliant on Taiwanese output with and without US intellectual property for at least the next two years? Any supply disruptions from Taiwan, regardless of the reason, would prove enormously disruptive for the tech industry and nearly every aspect of the economy if this golden goose is prevented from laying its golden eggs. Geopolitically and economically, Taiwan is mission critical.
8. Russia: shield your eyes?
Russia could be in for a new level of pressure from the Biden administration, partly as the Democrats still believe Russia was heavily involved in the disruption and disinformation in the 2016 election cycle, and possibly as well on the recent cyberattack many accuse Russian operatives of having perpetrated. A cold relationship could get that much colder and make it increasingly difficult for Russia to access the USD-based financial system and attract inbound capital investment. This could weigh on the ruble and Russian assets.
But more importantly, given Russia’s heavy reliance on exporting to Europe, the issue of Russia will represent perhaps the greatest test of the strength of traditional US-Europe alliances, as well as he EU’s own resolve in creating a euro-based financial system that is sufficiently robust to exist independently as well.
9. The Middle East: no good choices
The focus on shifting away from fossil fuels in the developed world potentially doubles down on the risks, as oil and gas exports are the economic underpinning of the region. The shift by Biden back to less hostile stance on Iran could likewise set the region on edge, and China’s increasingly heavy reliance on imported Middle East-sourced oil relative to the US will mean that it will inevitably deepen its involvement in the region after seeing its oil imports more than double over the last 10 years. China is far and away the largest importer of oil now.
10. Europe and multilateral institutions: lip service at best.
Trump’s presidency was a massive problem for the EU. What will be the change under Biden? In the beginning, we’ll likely see a helpful lack of urgency on any new protectionist trade policies together with plenty of lip service on the friendly traditional relationships, which will buy some short-term relief. But there are plenty of areas where the US and EU can get into trouble, from policy on Russia noted above, to whether the EU is willing to take sides in a deepening US-China rivalry. Also, the increasingly inwardly focused US voter doesn’t give a hoot about Europe.
Elsewhere, Biden will also make a show of normalizing US involvement with multilateral institutions like the UN, WHO and initiatives linked to the international fight against climate change. But these are not broadly popular – particularly the WHO and its PR disaster in not declaring Covid a pandemic – and could prove surprisingly limited.