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But market strategists say investors need to start preparing to learn how Biden’s presidency will affect certain sectors.
Experts also point to the fact that Biden, as Barack Obama’s vice president, has experience helping the economy recover from a recession.
“Investors should take some comfort in the idea that Biden will find himself in somewhat familiar waters when his presidency begins,” Jeff Schulze, investment strategist at ClearBridge Investments, said in a report. “As vice president, Biden took office in the midst of the global financial crisis and helped return the economy to an expansion characterized by steady but slow economic growth.”
The new Washington regime may also have an impact on the market beyond specific industries and sectors.
Value over growth
“There could be a shift to value industries like healthcare,” said Andrew Rosen, president of Diversified Lifelong Advisors, in an interview with CNN Business. “It’s healthy to see the recent technological pullback. There needs to be more diversification.”
Tech and growth stock valuations may also come under pressure if the economy continues to recover next year, a scenario that could accelerate once a Covid-19 vaccine is widely available.
Investors may soon re-invest in hard-hit consumer stocks, many of which still pay strong dividends despite the pandemic. With that in mind, defensively oriented stocks (companies with lots of cash and little debt) could thrive.
“Companies with stable balance sheets, reliable cash flows, and the capital to close the gap created by Covid-19 would outperform,” Lauren Goodwin, an economist and multi-asset portfolio strategist at New York Life Investments, said in a report. Monday.
International stocks, particularly those in markets like China, which were a primary target of Trump’s trade wars, could also rebound.
“Emerging markets could benefit from a lesser ‘America first’ policy under Biden,” added Rosen. “He may try to fix some international relations to pave the way for less harsh trade policies.”
Despite the early results, it may not be wise to focus too much on the performance of the markets immediately after the election. Short-term successes could also turn into long-term investment failures.
“Finance was the top performing sector the day after the 2016 election, and that group, along with energy, were the top two the following month,” said ClearBridge’s Schulze. “While these groups continued to show strength in early 2017, they have been two of the three worst performing sectors since then.”
