We had a pretty volatile week, at least politically. But stocks just went up last week with the S&P 500 gaining over 6.5%. It seems that it didn't matter really who was winning the elections.
In the long-term, it actually doesn't matter much as stocks always go up, whoever is president. But if we want to beat the market, then we should look at all possible scenarios of what may happen during a Joe Biden presidency.
During the Trump Presidency, we had record low unemployment rates. This is unlikely to happen again, for two reasons:
1. Tariffs
Donald Trump was able to have these record low unemployment rates because of Tariffs but under a Biden presidency, the relations between the US and China/EU may improve and if the tariffs are gone, these jobs are going to be exported out of the US.
2. Inflation
With all the money printing that has been going on, unemployment rate of 4% may cause inflation, something no president wants. Full employment will have to be sacrificed.
What about taxes?
It seems that taxes won't go up during a Biden Administration since the Democrats failed to win the Senate and Republicans are now stronger in the House.
What is more likely to happen is the status quo with even more actions from the Federal Reserve System which can overpass Government limitations. It seems that gold $GOLD and stocks are set to keep going up as bonds and cash are still bad investments.
The tech stocks are still going to face antitrust probes as this is bipartisan. This can potentially lead to a rotation in stocks from tech into other sectors.
What we need to do as investors is to look for individual stocks, which are cheap and which have low correlations with the rest of the market, instead of focusing on the broad market.
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