Biden win ‘would give trade a boost’

A Joe Biden win in the US election could deliver a boost for renewables and electric vehicle stocks, according to global investment manager Nuveen.

A Joe Biden win in the US election could deliver a boost for renewables and electric vehicle stocks, according to global investment manager Nuveen. Picture: AFP

A Joe Biden win in the US election could deliver a boost for renewables and electric vehicle stocks, while infrastructure and companies with large international exposure would also likely benefit as trade risks de-escalate, according to global investment manager Nuveen.

Conversely, if Donald Trump secures another four-year term, cyclical sectors and small cap companies with a high percentage of revenue generated domestically would be likely winners, as would firms with high tax burdens or high regulatory risk, the $1 trillion US-based asset manager has predicted.

“Should former vice-president Biden win the presidency and the Senate flip to Democrats control, we would expect at least a moderate rise in corporate and certain individual income taxes and a larger rise in federal spending to fund more fiscal stimulus, healthcare and environmental policy reforms,” Nuveen’s chief investment strategist, Brian Nick, said.

“However, a Biden win, with Republicans hanging on to the Senate, raises the risk of a deadlocked legislative and budgeting process. In the recent past, this power structure had led to de facto austerity and a negative contribution to GDP from federal spending.”

Under a Biden presidency, Nuveen expects Federal Reserve chairman Jerome Powell to receive another four-year term or be succeeded by someone with an even more dovish policy orientation, while trade and foreign policy would become less volatile.

New deficit spending, meanwhile, would sustain the reflation trade, leading to a weaker US dollar and further outperformance of Treasury Inflation-Protected Securities, or TIPS, and emerging markets debt could benefit from less tariff-related uncertainty and appreciating currencies, he noted.

Should Mr Trump be re-elected, the global asset manager expects the Senate to remain in Republican control and sees Democrats retaining the House of Representatives. This outcome could trigger price action similar to what occurred in November 2016, when high-tax companies and those with greater regulatory risk outperformed, Mr Nick said.

“Fiscal policy would not be quite as loose, given growing concerns among Senate Republicans about deficits, but a bipartisan stimulus plan around infrastructure would be on the table. Trade policy could become even less predictable and more adversarial, while more and higher tariffs seem likely,” he predicted of a Trump win.

Under a second Trump presidency, the US dollar would likely remain strong if trade policy uncertainty continued and there was a broad decline in global trade, while low taxes and rates would be a positive for the commercial property sector, he said.