Looking deeper into the turmoil and the controversy of the US elections and Biden’s leaning in terms of policies, we see that companies in the health, energy and precious metals industries could be well off.
First, we do not really know who the President will be yet. That said, the likely outcome is that the winner will be Biden. The lawsuits President Trump is engaged in, will likely not change the outcome. To become President, you need 270 electoral college votes. At the moment Biden has 306 Trump has 232.
So, just for example, if Trump’s lawsuits were to flip Pennsylvania, that would give him 20. Pennsylvania is one of the larger states, Wisconsin is only 3. Trump would need to flip Pennsylvania and possibly four or five other states in the next two weeks to exceed 270 and bring Biden below that.
This is extremely unlikely. At the time of writing, Trump gained ground in Georgia but still lost the recount. It seems when looking at over-voting, (more votes than registered voters) that there may have been some fraud. Proving it is difficult, after the fact.
We all know the old joke in Chicago in Mayor Daley’s day, vote early, vote often.
For a while, at the beginning of these post-election challenges, rumors abounded of voting machines that were possibly altering results. There was a glimmer of hope. The courts and perhaps the justice department are sorting this out. Then Arizona had the Sharpie issue. That issue has been debunked. That said, the sharpie issue can be real. In Maine, the thinner paper ballots used in Kennebunk Maine will misread with sharpies.
So well over 99 percent chance, Biden will be our President.
The house of representatives is also on the Democrats’ side, with democrats having 219 and the republicans having 203 seats and beating the majority threshold of 218 seats.
This is where the extreme liberal AOC and the so-called “squad” are.
Here’s the kicker, now that Alaska has finally counted, in the US senate we have 50 Republican seats, 46 Democratic seats. The Senate is where Bernie Sanders, Elizabeth Warren, Chuck Schumer, and Vice President Kamilla Harris join with AOC and the squad from the house of representatives on many liberal initiatives.
All eyes are focused on Georgia. The January 5th election runoff will be pivotal.
Both sides have spent hundreds of millions of dollars in attack ads. If the Democrats win both seats, such things as the economically concerning “Green New Deal”, will be a vote down party lines.
If the house is 50% republican and 50% democrat, the tiebreaking vote will be the President of the US Senate. That title belongs to the Vice President of the United States which will be Kamala Harris. She is also very liberal. This applies to all their other major agenda items such as tax policy, environmental policy, regulation, Medicare for all, and supreme court appointees.
With a chance of democrats losing the senate, could prevent the overturning of the Filibuster rules and markets imply lower fiscal spending.
With Covid cases soaring here in the US Biden has stated even in the campaign that he would listen to science (or truth over facts?). Shutdowns seem highly likely given his new panel. We will all be wearing masks, everywhere.
That’s different in California thought – where while churches were limited on occupancy, strip clubs were wide open.
If there are lockdowns, a new stimulus bill will be needed immediately to support unemployment. Biden will roll out Nancy Pelosi’s current bill exceeding $2 trillion, and possibly more. This will affect the national debt. The senate will easily pass it unless the republicans keep at least one of Georgia’s senate seat. As is widely reported, the Republican Senate currently wants a bill under the $1 trillion level.
Let’s talk about the investment environment under this political uncertainty.
Such a split government takes us back to the years under Obama, when markets went further up the more the government got divided. At that time, House republicans became the blocking notion, fending off Obama’s policies.
This time the battle will take place in the US senate.
When it comes to investing, ultimately, it is the macro fundamentals that matter the most. Those factors are inflation, interest rates, money availability, and domestic and global growth prospects. Some traders added China policy, monetary and fiscal policy, trade relations, and the dollar to the list.
Factors like the dollar seem to vary. If you want more exports, a slightly lower dollar is helpful and if you want more imports, a stronger dollar buys more.
With the China factor, there is a sentiment suggesting that both parties will be tougher on China; will try to repatriate essential pharmaceuticals; and will go for big infrastructure.
The Biden administration seems to support a nationalistic approach with his Made in America plan. However, some analysts looking at Biden’s fiscal and monetary policies believe a weaker dollar is possible. As more national debt is added via COVID-19 bills or others, the dollar lowers in value.
Biden has explicitly mentioned that the environment is a major focus of his and plans to rejoin the Paris accord. He will also rejoin the World Health Organization.
With the rise in acceptance of Modern Monetary Policy, the camel’s nose is under the tent. We first saw evidence of this during the huge stimulus package this spring when the Federal Reserve bought more government paper. To translate the term Modern Monetary Policy, also referred to as MMT, it basically means we no longer worry about using debt, forget about that, just print the money. Just be careful about inflation.
With all this in mind, what should we invest in? Here are a few picks what may fare well under Biden’s administration.
Biden plans to spend federal money to jump the development of renewable power, reinstate environmental protections and aim for clean energy.
NextEra Energy (NYSE: $NEE) is a leading innovator in this domain and NextEra has a division known as Florida Light and Power a regulated electric utility. They help generate power from wind and solar more than anyone else and for now, they lack competition giving them an edge.
With the likelihood that interest rates aren’t going to rise any time soon, it works in favour of the highly-indebted $NEE.
Under Biden’s presidency, the continued explosive growth in federal spending and very low-interest rates it is expected for gold to hold its value.
In the gold mining industry, Kirkland Lake Gold (NYSE: $KL) is a company that develops and operates gold mines. Their three mines are reported to be highly efficient and they have a great balance sheet. Rising gold prices pulled them out of their past debt problems.
With the current gold price of $1870.82 per ounce, the company looks to turn operating profits of around $1000 per gold ounce since their costs come in around $750 per gold ounce. This is only expected to grow if gold creeps closer to hitting $3,000 per gold ounce.
Looking at Biden’s take on the medical sector suggests that the US spends more per capita for healthcare than anywhere in the world.
With this and COVID-19 in mind, we look at, Teladoc Health Inc. (NYSE: $TDOC). This company provides services like telemedicine, medical opinions etc, and reaches people in rural areas. The company witnessed tremendous growth in COVID-19.
In the second quarter, the company witnessed an 85% YoY sales growth and an increase in virtual visits, which translated to 203% same period growth in visits. Virtual visits are less expensive than live office visits saving insurance companies money.
$TDOC also entered a merger agreement with Livongo (NASDAQ: $LVGO), which is being referred to as a match made in heaven. They offer testing systems such as blood pressure. The merger is seen as a no brainer and there is news about them going D2C and introducing new insurance products.
Understanding the political environment and leaning in terms of policies we see health, energy and precious metals do well.
Tech has had a beautiful run during the whole pandemic, along with most of healthcare. The question is how much steam is left? Now that the vaccines should open up for other industries. Perhaps take some money off the table and look for pockets of opportunities elsewhere.
All three are good companies and with great after US elections prospects which could help develop a diversified portfolio for the year.