Dotting the I’s and crossing the T(rump) – Biden’s rocky 100-day policy push amid impeachment and insurrection

Most newly inaugurated presidents take their pledges to crowds and fanfare, champing at the bit to get on with their first 100 days, the period over which they tend to receive their initial public assessment, which can often set the tone for the rest of their term in office.

Joe Biden was not so fortunate. Sworn in before a limited, distanced, mask-wearing audience and giving a sobering and determined first speech on 20 January, an historic day for him and Vice-President Kamala Harris.

The ceremony was held against a tainted backdrop. Allegations of a fraudulent election, the violent attack on the Capitol building and the consequent second impeachment charge against Donald Trump for “incitement of insurrection” will now go to trial in the Senate, all of which are serving to overshadow Biden’s first weeks and inevitably distract from his being able to ‘hit the ground running’.

First and foremost, there is a huge repair job due in America – cross-party tensions are at their highest ever, Trump remains a threat to democracy in many eyes amid talks of running again in 2024, the effects of coronavirus are the worst of any country on record, all while facing this rapid, deep and broad-reaching recession.

Felix Wintle runs the £29.8m Tyndall North American fund. He recalls a visit to the US ten years ago, during which he was hearing about an America divided like never before.

“And it’s obviously a lot worse now. There is a definite healing process that needs to occur in America,” he said.

Spreading the wealth

So how does Biden go about healing these deep and stubborn wounds? He needs to spread the wealth. Loading empathetic supportive words to those who felt marginalised was part of the reason Trump was elected in the first place, and his supporters remain vehemently convinced that Biden “stole” the election.

“The way his stimulus package, or more accurately his income support package, has been implemented is such a uniquely American thing to do – mailing cheques to people individually,” Wintle said.

“A lot of these people just want to realise that they count, that they are heard. I think a government that reaches out and gives people money in tough times can go a long way to smoothing over the cracks.”

The week before his inauguration, Biden announced plans for his $1.9trn (£1.38trn) American Rescue Plan, proposing an additional $1,400 in stimulus cheques to anyone earning less than $75,000 a year, extending unemployment insurance to the 16 million people currently relying on benefits, and focusing $350bn on allocations to state and local governments in need of fiscal support.

In the days after he took over the Oval Office, the new President said the pandemic had “led to the most unequal job and economic crisis in modern history. And the crisis is only deepening.”

After those initial financial support packages, his administration’s next priorities directly target the virus: a $160bn test and trace programme alongside plans to vaccinate 100 million people in the first 100 days and $130bn towards reopening schools.

Paris Accord: A breath of fresh air?

While these immediate priorities will face little resistance, when it comes to his original priorities (laid out before the coronavirus was the global pandemic it has become), such as tackling climate change and infrastructure spending, he might face some challenge, according to Joe McDonnell, head of portfolio solutions EMEA at Neuberger Berman.

“He wants to get the Paris Accord resigned and wants very significant infrastructure spending, but that’s where he’s going to get some objections.”

Several members of his own party across the Senate and the House of Representatives have argued over disproportionate costs at state level associated with Biden’s views on climate change, he added.

“It’s not like he has full support around [climate change and infrastructure]. We see all over the world how wasteful public infrastructure programmes can be, so can he get sufficient public private partnerships in place to make these things work?”

Those excited by his ‘Green New Deal’ might be set up for disappointment, said Thomas Becket, chief investment officer at Punter Southall Wealth.

Cross-party issues

While he said the primary focus will be on clean energy and restricting fossil fuel usage, the ability for the new administration to push through widespread reform is limited.

“I just do not think there’s going to be as much ‘wiggle room’ on those specific policies that some people on the perceived progressive side of the argument think there will be.”

He supports his view with an explanation of how he sees the political calendar operating in the US.

“As soon as current situation of dealing with the pandemic is out of the way, and the new president is fully installed with the politicians around him, they will continue to self-serve. Everyone tends to increasingly have an eye on the US midterm elections in two years’ time.

“A lot of the people who need to be relied upon to support some of these policies will be thinking about what they can do to get themselves elected by their populations, as opposed to trying to push for radical reforms in the US economy.”

Becket – responsible for £3.4bn in AUM – adds that even with more centrists on either side of the Democrat/Republican argument, the emphasis on undoing much of what Trump did during his time in office could simply fan the flames of toxicity between the two parties, making it increasingly difficult to get deals passed.

“I think there is a real determination to get things done. But I think it’s questionable how much that they can get done.

“I’m sceptical as to what is economically possible as opposed to just ‘green sky thinking’, especially in states [economically reliant on mining fossil fuels] such as Pennsylvania. They don’t want to bury these industries, because that will be, politically, very difficult for them in future elections.”

Tax plans vs reality

There seems to be some disconnect between the new President’s ambitions to introduce higher taxes later this year and what the market has priced in.

With much public support for his planned tax hikes, McDonnell thinks Biden appears determined to push those reforms through this summer, while the market appears to have assumed otherwise.

“That would be my biggest concern, that would be a bump in the road that maybe the market hasn’t captured… and it could react quite badly.”

The other concern is if a more relaxed immigration policy were to prioritised too soon. Given the current political climate, that would not garner much support in the Senate.

“That would be an example of a bad thing to do, it would cause problems in the Senate and would not get bipartisan support. Better to focus on the stimulus,” added McDonnell.

Becket said: “We’re going to see clear evidence of the unification of the White House, the Treasury and the central bank, for the first time in history.

“It’s going to be a very interesting period ahead, especially how the dynamic plays out between Janet Yellen, in charge of the Treasury and Jerome Powell, in charge of the Fed. I think it’s going to lead to a lot of debt creation.”

Sectors to look out for

While seeing better opportunities in other regions such as Asia and emerging markets, he said there would be selected areas of interest in the US equity market, such as healthcare or clean energy.

Elsewhere, Wintle’s fund is positioned for a huge inflationary spike, based on factors such as the oil price recovery and expectations that Q2 could deliver the second biggest GDP quarterly rise since World War Two.

“People are saying the markets look lively, a bit exuberant? They do, and for good reason. We’re about to see the most incredible data that anyone’s ever see in terms of rate of change in absolute terms versus last year.”

His contrarian approach has seen him buying sectors like energy, he has initiated a position in one bank with a view to adding more, and materials.

“Basically, we want to be long inflation, commodities, and long anything that benefits from rising interest rates.”

With respect to President Biden’s boldest ambitions, Becket added the real driver of markets is the point in the cycle. Energy’s recent strong performance – completely incongruous with Biden’s manifesto for a clean energy revolution – tells you that no one owned it so is demonstrating something of a catch-up trade.

“I think the key message is that market positioning could be just as important as the actual policy announcements themselves.”