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The Biden Agenda Begins to Take Shape

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Insights and Market Perspectives

The Biden Agenda Begins to Take Shape

Author: Greg Valliere

January 12, 2021

IT’S DIFFICULT TO FOCUS ON JOE BIDEN’S AGENDA in the wake of the riot, as Donald Trump faces impeachment. But we’ve talked with some insiders and have initial impressions of where things are headed . . .

A SENSE OF URGENCY is a dominant theme. There’s a concern in Biden’s team that one or both of the houses could flip back to the GOP in 2022. A first-term president historically loses 5% of his congressional support in his first mid-term election. If that happens in two years, Biden could lose the House and Senate.

SO THERE’S NO TIME TO WASTE, despite all the distractions — an impeachment debate that could gobble up time, a Cabinet that hasn’t been confirmed, the need to pass a stimulus bill by early February, and most importantly a need to vaccinate millions of Americans. This latter issue already is frustrating Biden, who has snapped at his virus team for not being ready to roar out of the gate.

THE SLEEPER ISSUE: We’ll look at taxes in a minute, but it’s worth noting that an issue near the top of Biden’s agenda is climate change. Net zero emissions by 2050 is the very ambitious goal, which will require sustainable development, including investments in mass transit, charging stations for electric cars and retrofitting buildings to make them energy-efficient.

THERE’S A FUNDAMENTAL DIFFERENCE between the parties: Republicans say the Biden plan will cost jobs, while Democrats say it will create jobs. Biden’s activist environmental team believes carbon capture and sequestration technology is essential to reducing emissions from power plants as well as heavy manufacturing.

A SURE SIGN of how important this is to Biden: He will announce that the U.S. has rejoined the Paris climate control accord within hours of his inauguration next Wednesday.

REGULATORY REFORM: Biden will seek to reverse Trump regulations on dozens of issues — from antitrust policy, to drilling in Alaska, to light bulb standards. The Democrats’ control of both houses will make these reversals easier to attain.

TRADE POLICY: There’s a growing consensus in Washington — in both parties — that steep tariffs have not helped the U.S. economy. Biden probably will keep tariffs on China until there’s a new understanding between him and U.S. allies on how to confront Beijing. Relations with Canada, Western Europe and much of Asia will improve immediately; at the least, the tone will be more conciliatory.

THE BIG ISSUE — TAXES: We’re assuming that another stimulus bill, plus a more widely available vaccine, will get the economy humming by late spring. That means the Biden Administration will have flexibility to move on to the most controversial issue of all — major tax increases.

BIDEN IS VIRTUALLY CERTAIN TO PROPOSE a hike in the top individual rate from 37% now to 39.6%, and he probably will prevail on this. He wants to hike the top corporate rate from 21% to 28%, and something around 25% seems do-able. He also should prevail with a new minimum corporate tax of around 15%.

OTHER TAX GOALS WILL BE VERY CONTROVERSIAL, including any major change in estate taxes, taxing capital gains as ordinary income, imposing a new Social Security payroll tax, and enacting a Wall Street transaction tax. Moderate Democrat Joe Manchin of West Virginia won’t go along with huge tax hikes.

THE BIG IMPACT FOR THE MARKETS, of course, is how higher corporate taxes could affect earnings. A Bank of America analysis, reported recently by our friend Bob Pisani at CNBC, lists the following impacts on earnings: Technology, down 9.2%; health care, down 8.4%; communication services, down 8.2%; consumer discretionary, down 7.5%; financials, down 6.5%.

THERE WILL BE OTHER FACTORS, of course, that will affect corporate earnings, such as the positive impact on the financial services sector as higher interest rates raise their profits.

BOTTOM LINE: The Biden administration has so many goals — and such a thin congressional majority — that it will have to prioritize. What comes first after a stimulus bill? A higher minimum wage, rising to $15 per hour? A new trade plan? Immigration reform? All of these issues could get bogged down by impeachment and Covid-19.

AGAIN, THE BIG ISSUE BY SUMMER will be taxes. The financial markets apparently have shrugged off a negative impact, betting that the economy will be surging in six months. If it is, the threat of tax hikes will come sooner rather than later.


The views expressed in this blog are those of the author and do not necessarily represent the opinions of AGF, its subsidiaries or any of its affiliated companies, funds or investment strategies.

The views expressed in this blog are provided as a general source of information based on information available as of the date of publication and should not be considered as personal investment advice or an offer or solicitation to buy and/or sell securities. Speculation or stated believes about future events, such as market or economic conditions, company or security performance, or other projections represent the beliefs of the author and do not necessarily represent the view of AGF, its subsidiaries or any of its affiliated companies, funds or investment strategies. Every effort has been made to ensure accuracy in these commentaries at the time of publication; however, accuracy cannot be guaranteed. Market conditions may change and AGF accepts no responsibility for individual investment decisions arising from the use of or reliance on the information contained herein. Any financial projections are based on the opinions of the author and should not be considered as a forecast. The forward looking statements and opinions may be affected by changing economic circumstances and are subject to a number of uncertainties that may cause actual results to differ materially from those contemplated in the forward looking statements. The information contained in this commentary is designed to provide you with general information related to the political and economic environment in the United States. It is not intended to be comprehensive investment advice applicable to the circumstances of the individual.

AGF Investments is a group of wholly owned subsidiaries of AGF Management Limited, a Canadian reporting issuer. The subsidiaries included in AGF Investments are AGF Investments Inc. (AGFI), AGF Investments America Inc. (AGFA), AGF Investments LLC (AGFUS) and AGF International Advisors Company Limited (AGFIA). AGFA and AGFUS are registered advisors in the U.S. AGFI is a registered as a portfolio manager across Canadian securities commissions. AGFIA is regulated by the Central Bank of Ireland and registered with the Australian Securities & Investments Commission. The subsidiaries that form AGF Investments manage a variety of mandates comprised of equity, fixed income and balanced assets.

About AGF Management Limited

Founded in 1957, AGF Management Limited (AGF) is an independent and globally diverse asset management firm. AGF brings a disciplined approach to delivering excellence in investment management through its fundamental, quantitative, alternative and high-net-worth businesses focused on providing an exceptional client experience. AGF’s suite of investment solutions extends globally to a wide range of clients, from financial advisors and individual investors to institutional investors including pension plans, corporate plans, sovereign wealth funds and endowments and foundations.

For further information, please visit AGF.com.

©2023 AGF Management Limited. All rights reserved.

Written by

Greg Valliere

Greg Valliere

Chief U.S. Policy Strategist

AGF Investments

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