Share markets will hit record highs this year because of one move that Joe Biden has already made.
That’s according to DeVere Group chief executive Nigel Green, who explained the appointment of Janet Yellen as US Treasury secretary is a very positive development for equities.
“Despite the inauguration pomp and ceremony at the Capitol, investors’ focus is now already on Janet Yellen, who will take over from Steve Mnuchin as US Treasury secretary,” he said.
“In her testimony in congress on Tuesday, the former Federal Reserve chair called on lawmakers to ‘act big’ on coronavirus stimulus especially with interest rates being at historic lows.”
Back at the Federal Reserve last decade, she was focused on achieving full employment. In fact, she remains the only chair to see jobs added every month of their term.
Yellen’s track record proves she is prepared to spend to achieve her aims, according to Green.
“With Ms Yellen in charge and with an economy that needs a shot in the arm, I think we can expect massive spending combined with continued ultra-low interest rates for years,” he said.
“This will act as a catalyst for stock markets.”
BetaShares director Adam O’Connor also expected fiscal stimulus to be a high priority for the new administration.
He said there are “expectations of anywhere from $600 billion to $1 trillion in pandemic relief on top of the recently enacted $900 billion package”.
“Tax increases to finance additional spending are also likely to follow later on.”
She hasn’t even been officially installed yet, but even during Yellen’s congress testimony this week the US dollar sank — indicating investors’ money shifted from safe havens, like currencies, to go towards shares.
White House stability is good for shares too
The predictability that the Biden administration is expected to provide would also be a boon for stocks, said Green.
“There will be peaks and troughs as always, but with these policies and greater stability in the White House, I believe, we could see markets produce even higher highs in 2021 than in 2020.”
Switzer Group founder Peter Switzer agreed the US market, and by extension Australian shares, is on the way up.
“Under Joe Biden, I expect the US to grow stronger in 2021 and 2022, which will be good for the world economy and us as exporters,” he said.
“It’s why the share price of local company, Woodside Petroleum Limited (ASX: WPL), in the oil and gas space, has seen its share price go from $16.80 in October to $27.40 [on Wednesday].”
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Returns as of 6th October 2020
More reading
- 5 things to watch on the ASX 200 on Friday
- What a dramatic day in the US could mean for ASX shares in 2021
- 5 things to watch on the ASX 200 on Tuesday
- ASX 200 drops 0.8%
- Why the Woodside Petroleum (ASX:WPL) share price is dropping lower today
Motley Fool contributor Tony Yoo has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.
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