With the results of the 2020 presidential election as good as settled, investors are wondering about not only the political effects of Biden’s presidency, but the economic effects as well. It’s true that President Trump hasn’t conceded the election and is still doing his best to contest the results, but his case seems to be getting weaker by the day. In all likelihood, Biden will assume the presidency in January, which means that some adjustments are in order for businesses and investors alike.
There’s plenty of uncertainty around changes that Biden is likely to make. Trump lowered tax rates for corporations; will Biden raise them again? How will the market regulations change? Will tougher regulations on corporations affect investments? As with any major change, some industries will take a hit, and others will be able to increase their profits. Before you decide to switch to safer investments or leave the market altogether, here are a few things to consider.
Even though Biden will certainly be pursuing his own policies as president, he’ll also have to compromise to some degree with the Republican-majority Senate. Experts are predicting that Biden will be choosing people for his cabinet members who have more centrist views; we’ve already seen the selection of Janet Yellen, who has the support of both Democrats and some Republicans. There could be some changes eventually, but they won’t necessarily be as dramatic as some people are saying.
Another thing to keep in mind is the recent Dow index surge, putting it past 30,000. This was due to Trump’s plans to revitalize the national economy, but it’s thought that the stock market will stay high even once Biden has assumed office. Even though there’s considerable doubt about the strength of the economy due to COVID-related business shutdowns, the government’s commitment to Operation Warpspeed, as well as Pfizer’s announcement of a successful coronavirus vaccine, has boosted hopes that the country’s economy will open up in the near future.
That being said, news of a vaccine isn’t enough to back up otherwise shaky investment plans. If you want to take the safe route with your investments options like precious metals or municipal bonds might seem like the surest bet; but you don’t have to give up on the stock exchange for good. With every change comes opportunity – here are some of the sectors that we think could strengthen your portfolio in 2021.
Construction or Infrastructure
Biden has expressed his commitment to encouraging partnership between the private and public sectors, specifically in order to increase spending and completion of infrastructure. It seems likely that this will happen without too much opposition, so investors can expect to see significant growth in this sector during the next year. Consider investing in companies that supply the materials for construction projects – manufacturers of concrete, asphalt, steel components, etc. When considering one of these companies, consider how dependable their supply chain is, as well as how stable their financials are. Another potential investment opportunity in this sector would be equipment manufacturers like Caterpillar Equipment – these are the companies that make the machinery to move the construction materials around. The main concern is, how will future green energy legislation affect these companies? Even with a GOP-led Senate, that doesn’t guarantee that everything will be smooth sailing for the construction sector.
2021 could be the year when green energy sources start making their strongest inroads yet into traditional power sources like oil and natural gas. Look for companies like NextEra Energy, ones that have already made changes to their practices to include more renewable energy, and that are gearing up for even more changes in the coming year. With Biden as president, companies that are working to reduce their carbon emissions can expect new policies to work in their favor. If you want to invest in this sector, look into companies that manufacture solar panels, electric vehicles, etc.
This shouldn’t come as a surprise; with the recent influx of patients into hospitals and the demand for a coronavirus vaccine, investment in this sector seems like an obvious choice. Biden has consistently emphasized healthcare as one of his priorities, and that isn’t likely to change once he’s president. Look for companies like Becton Dickinson, one of the key manufacturers of crucial equipment and medical supplies. Not only do they have good management, but they’ve been very successful with their product distribution. Since the demand for medical products and services has risen sharply in the past few months, the companies that can pull off mass distribution at such relatively short notice are the ones to watch.
In addition to achieving efficient distribution, companies that have thriving Medicare enrollment programs, including supplemental plans, will likely do well in the coming year. However, this can be a bit of a double-edged sword. Healthcare companies that are heavily involved in government programs can depend on government support while the program lasts, but that’s the catch – government programs can change quickly, and participating healthcare companies can’t help but to be affected by these changes.
Aside from the specific sectors that are good investment opportunities for 2021, what else is there to keep in mind for your investment strategy? It’s possible that, with new legislation, capital gains rates or income taxes will go up; if this happens, one possible strategy would be to move some of your investments into a Roth IRA or Roth 401k. This would increase your savings, while largely avoiding the effects of the predicted tax hike. You could even cut down on broker fees by using Stash, an SEC-registered platform that helps you control your own investments. Predictions for the coming year have investors filled with questions, but even the most cautious people still have some good options. Just make sure to balance the risks you take, and invest in companies that will have solid enough profits to offset the effects of potential inflation. There are no guarantees when you invest, but the right investment choices should help get you as close as possible.
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