The US elections have kept Americans and the world in suspense as, after all, the United States represents the world’s largest economy. Therefore, the difference between a Donald Trump’s second term or Joe Biden winning the White House was evident. After Biden’s victory, it is worth asking: how does this affect the economy? In which sectors should we invest in view of the foreseeable changes in US policies?
ESG investing, the clear winner
A sector that is undoubtedly favored after Biden’s victory is ESG investing. In matters of climate change, the elected President of the United States’ vision is completely opposed to the one of the defeated Republican candidate. While Trump was against climate change policies, the green economy will constitute one of the foundations of Biden’s term.
One of Biden’s promises during his race to the White House was for the United States to rejoin the Paris Agreement after the country had withdrawn from it only months after Trump’s election as President. It is also expected that, during Biden’s term, regulations on oil and gas are restored, as well as initiatives such as the Clean Power Plan are promoted again. This 180-degree change in the environmental policy will increase investors’ confidence in the ESG sector, which will represent a boost for renewable energies companies such as Iberdrola.
Healthcare and coronavirus
Biden’s election as President will not only benefit the environment sector, but he has also reaffirmed in multiple occasions his commitment with healthcare. Biden will propose a plan called Bidencare to allow citizens with no private medical insurance access to a public one at reasonable prices. This greater access to healthcare will suppose an incentive to invest in pharmaceutical companies.
Biden has also shown strong disagreements with Trump in how the coronavirus crisis has been managed. He has declared more severe lockdowns will be imposed if necessary, as opposed to Trump who has avoided them at all costs. This situation would cause a boost for food commodity companies.
What is Europe’s opinion?
Biden’s victory is well received by the European Union, hoping to end a raging tariff war with the United States. Exports such as olive oil had been severely affected by this situation. The German Chancellor, Angela Merkel, is one of the European leaders who have been pleased with the results of the US election. She has congratulated Biden on his electoral victory and called on him to “recalibrate” relations with Germany and the rest of Europe.
In Spain, Biden’s victory also seems to have been received with optimism, at least in the markets. On Monday, the IBEX 35 closed with a rise of 8.57%, its biggest rise in the last ten years. Some noteworthy increases are the ones of Banco Santander (19´22 %), Repsol (18´23 %), BBVA (16´65 %), Inditex (14´03 %) and Telefónica (13´67 %).
Environment, healthcare, food commodity products, products exported to the United States… These are some of the sectors that will benefit from the Democratic victory in the presidential elections. Economy and politics are certainly linked, and investors will have to adapt their portfolios to the new situation. Months of adaptation and uncertainty are yet to come, but what remains certain is the short-term future of the American and world-wide economies lie in ESG investing.