After weeks of uncertainty following the U.S. presidential election, President-elect Joe Biden has finally begun the transition to the White House on Jan. 20.
Earlier this week, the General Services Administration announced it was making federal resources available to Biden as he prepared to transition into office — although President Donald Trump still hasn’t conceded he lost the election.
Also this week, Biden announced his cabinet nominees, which include Janet Yellen, a widely respected former chair of the Federal Reserve Board, as the country’s first female treasury secretary. Yellen is regarded as a proponent of fiscal stimulus who’ll be able to work across party lines — qualities that may prove crucial as the U.S. trudges toward economic recovery.
Markets have rallied since election day and continued to do so this week as the transition began in earnest, with the Dow Jones Industrial Average trading above 30,000 on Tuesday for the first time in history. But was that milestone a response to the end of election uncertainty in the U.S.?
Aaron Dunn, senior equity analyst and head of research with Vancouver-based KeyStone Financial, said in an interview that monetary policy and hopes for a Covid-19 vaccine have had a far greater impact on short-term market movements than Biden naming his cabinet picks.
“I don’t think the market movement would have been that much different if Donald Trump had won, to be honest,” Dunn said.
While the market may be happy to see the election drama fading away, “what’s going to drive an investor’s portfolio is not what happens in the next couple weeks, but what happens over the next one to three years” as the economy recovers, Dunn said.
The renewable energy sector could play a role in that recovery. Dunn said Biden’s election was a “marginal positive” for the clean tech space, although the sector still “performed great” under the Trump administration.
“A lot of the reason for that just comes down to dollars and cents,” Dunn said. “The Democrats love [renewable energy] because it’s good for the environment and the Republicans love it because it creates jobs.”
As Biden prepares to take office, it remains to be seen which party will control the Senate. Currently, the Republicans hold 50 seats in the Senate and the Democrats hold 48. There are two run-off elections in Georgia scheduled for Jan. 5. A tiebreaker goes to the Democrats.
Biden campaigned on a promise to raise corporate taxes — a policy move that would likely dampen markets, but seems highly unlikely if the Republicans maintain control of the Senate. Even if the Democrats win the Senate, they would have a “very slim majority,” Dunn noted — and conservative Democratic senators would be loath to pass a corporate tax hike.
“Whether the Republicans maintain control of the Senate or not, I think that most of the legislation that comes out of the Senate is going to be fairly moderate and Democrats are still going to have to make compromises,” Dunn said.
Dunn said the market has “moved past” the election and is now more focused on Covid-19 vaccines and how the economy fares heading into an uncertain winter.
“How does the economy recover? What kind of technological innovations do we see to further support growth in the future? Those are the things that really matter,” Dunn said.