Nikko Asset Management: Comments on the incoming Biden presidency

January 20, 2021

Displayed below please find three comments from John Vail, Chief Global Strategist at Nikko Asset Management, related to what he is turning his attention to with the Biden presidency set to begin today.

Executive Orders

Full information is not available on what Executive Orders will be changed or started, but some could have an effect on markets, especially any restrictions on fracking or other increases in regulation, especially in the healthcare and drug sectors. Note, however, that district judges may halt some of these orders in the same way they did with Trump’s orders.

The aggressiveness of the Orders will indicate how much Biden wishes to compromise with Republicans in the Senate on the first stimulus bill. It is possible that if the Orders are not radical and the negotiations are without blame-game rancor, he could get enough Republicans to pass about half of his fiscal requests, which would be positive for the markets.

There is a major debate as to whether many of his programs for a second stimulus bill can be legally passed through the Reconciliation process, so we will watch such, although it may take quite a while.

US-China Relations

Many Biden appointments sound tough on China, but they wish to re-engage and fight less on trade. Whether they have the backing of corporations and top Democratic officials to take tough actions, if required, is somewhat doubtful, but there are mounting efforts globally on various human rights issues, which Democrats will find it hard to ignore.

Biden might remove a few sanctions, but the key ones are on exports of high tech equipment and components, with the US military and intelligence services having increased influence in such matters these days.

Cabinet Appointments

The proposed Cabinet definitely has a Progressive tilt. Even Yellen, who seems centrist and certainly is respected, certainly has strong progressive credentials. Appointments can fairly quickly be approved by Vice President Harris breaking any ties, but it will be interesting to see if the Democrats care if they have no or only a handful of votes from Republicans.

If they wish to compromise in the hope of getting bills besides Reconciliation bills passed, then they may have to withdraw the most controversial nominees. If some of the most Progressive ones are withdrawn, then financial markets might be somewhat assuaged, not that the Democrats care so much about boosting equities anyway.