HomeUS Elections: Biden reigns Supreme

US Elections: Biden reigns Supreme

9 November 2020 By Mircea Vasiu

Joe Biden has just been elected the 46th President of the United States. The Democrat candidate had a hard time winning the White House, as the race was extremely tight. 

Now that the name of the next President is known, leaders from all over the world began congratulating Biden. Already during the weekend, the market learned that one of the very first things Biden will do is to reverse the course of some of the controversial decisions under Trump’s administration – the withdrawal from the Paris climate deal and World Health Organization.

What more can we expect from a Democrat president?

Expectations of a Biden Presidency

The stock market rallied ahead of the weekend as a Biden win became obvious. The reason behind the rally is that a huge fiscal stimulus is expected, together with massive investment in infrastructure.

However, another important thing on Biden’s list is raising corporate taxes. Or, exactly the opposite of what Trump did. Moreover, under Biden, the markets should expect tighter business regulations and labor unions empowering too.

Trump cut the corporate tax from 35% to 21%, and Biden’s plan is to lift it back to 28%. Moreover, profits obtained abroad will be taxed more, with the idea being to encourage companies to build in the United States rather than abroad.

Personal taxes are expected to increase too. The marginal income tax will rise to 39.6% from 37%, and the social security tax on income for people making over 400k as well. On the other hand, the federal minimum wage of $15/hour is a target under the Biden administration.

Of all the things promised during the campaign, the one that matters for financial markets is the infrastructure package. Biden’s plan is to invest over $2.4 trillion dollars in infrastructure, and the big question here is if the bill will pass Congress.

Speaking of Congress, one of the possibilities that the markets considered was a “blue wave” outcome from this election. More precisely, the Democrats will win the Congress together with the White House. Such an outcome seems unlikely at the moment, but still not impossible. If that comes to fruition, the infrastructure bill will pass Congress easily. If not, it will face tough challenges from Republicans.

All in all, Biden’s victory is cheered even by businesses that are affected by the corporate tax hike. The explanation is that under Biden, trade wars will likely disappear, with notable effects on both US corporations and society’s welfare.