Joe Biden was officially sworn in as 46th president of the United States on Wednesday and investors appear to have celebrated the occasion by sending the S&P 500 index to new all-time highs. But what’s next for the index as Biden settles into the White House?
‘Best of both worlds’
The S&P 500 index and the market, in general, will benefit from the “best of both worlds” as Biden’s economic policies will consist of higher spending, more stimulus, and lower taxes, Blueprint Capital Advisors CEO and co-founder Jacob Walthour told CNBC.
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While this will create a “net-net bullish” environment for the market, investors need to be selective in what sectors they buy, he said. Tech stocks, in particular, should continue performing well, such as Amazon.com, Inc. (NASDAQ: AMZN).
“Everybody’s using Amazon now to get what they need — businesses, individuals,” he said. “It’s hard to live without Amazon, and no matter how long this pandemic lasts, Amazon’s going to continue to do well.”
Meanwhile, the newest member to the S&P 500 family, Tesla Inc (NASDAQ: TSLA) offers a much larger timeline for growth.
Granted, Tesla’s stock was a major winner in 2020 but investors “can’t really think about it from a valuation perspective,” he said. Electric vehicles are the “wave of the future” and many countries have already set long-term goals for reducing combustion cars on the roads
Change in tone
Biden’s inauguration focused on unity and “taking the temperature down” and this could bode well for the markets, Andy Blocker, head of U.S. government affairs at Invesco, also told CNBC. Biden doesn’t want to rule over his opponents and put them in a corner.
Rather, he is open to working with Republicans to help introduce pandemic relief bills and making a deal, he said. Biden will need Republican support if he wants to spend over a trillion dollars and could be willing to give up other non-COVID political decisions, like the minimum wage. He said:
“Republicans are going to be willing to play.”
Ditch America for Europe
Investors may want to switch their focus away from American indices and stocks and look towards Europe, Elizabeth Burton, chief investment officer of the Hawaii Employees’ Retirement System, also told CNBC. U.S. consumers and companies could face new regulations as the Biden administration focuses on climate change issues.
Meanwhile, European equities and emerging markets offer something for investors to get “more excited about,” Burton said. Europe in particular offers investors better “quality of value” versus tech stocks in the U.S.