How markets might react to a Joe Biden presidency and a GOP-controlled Senate
Wall Street investors largely believe Joe Biden’s presidency could mean lower returns on the stock market, according to new research from CNBC..
As part of CNBC’s quarterly report, more than 100 investment directors (CIOs), portfolio managers and CNBC community members who manage money were asked what they think about the outlook for the stock market in the coming year under the new administration. The survey was conducted from 14 to 23 December.
Two-thirds of them said that the first four years of rule Joe Biden will be worse for stocks than during the presidency period Donald Trump.
Since Trump’s inauguration in January 2017, the S index&The P 500 rose more than 60%, thanks in part to a significant corporate tax cut by the president, which resulted in skyrocketing profits and record buybacks. The Trump administration has also loosened many rules over the past four years, creating a favorable market environment for oil and other industries..
Many investors are worried that canceling the tax cut that Biden promised could severely cut profits at a time when market valuation is at multi-year highs. Biden’s tax plan calls for higher capital gains for high-income earners.
While investors believe Biden’s policies could create disincentives for the entire market, some sectors are doing better than others. Consumer, industrial and financial sectors will perform best under the Biden administration, according to research.
Utilities, consumer goods and the electricity sector may find it difficult to improve their performance, according to the study..
Still, Wall Street is optimistic that the Dow Jones Industrial Average (DIJA) will hit new highs next year..
Two-thirds of respondents said that the benchmark for American «blue chips», will likely end 2021 at 35,000, a roughly 16% increase from Thursday’s close at 30,199.87. Five percent of respondents said the index could rise to 40,000 by the end of next year..
Ten percent said the DIJA would drop to 25,000 and 18 percent said it would drop to 30,000.
The 30 Dow stocks have eliminated losses caused by the pandemic and reached new highs by the end of the year, but lagged well behind the Nasdaq Composite, which is up more than 42% this year..
Investors and strategists were also asked what new investments – option contracts, bitcoins, or Special Purpose Acquisition Company (SPAC) – they or their clients will use in 2021. The majority, 58%, answered SPAC, 33% said bitcoin and 9% said options.
There was a SPAC craze on Wall Street this year, with funds raised through shell deals to a record $ 70 billion, five times more than last year. The rapid growth occurred amid increased market volatility caused by the pandemic. Participation of well-known investors, including the founder and CEO of the hedge fund Pershing Square Capital Management Bill Ackman (Bill Ackman) also increased the hype for these alternative mechanisms.
Bitcoin was the surprise winner of 2020, surpassing all major asset classes from stocks to bonds to commodities. The world’s largest cryptocurrency topped $ 20,000 for the first time this month, bringing its growth in 2020 to over 180%.
Many associate the mind blowing "cryptorally" with strong industry participation from companies such as Fidelity Investments, Square and PayPal. Interest from well-known investors such as Paul Tudor Jones (Paul Tudor Jones) and Stanley Druckenmiller (Stanley Druckenmiller), also contributed to the growth of the digital coin.