NEW YORK, Jan 20 (Globe Live Media) – When he takes office on Wednesday, President-elect Joe Biden will inherit a stock market near its all-time highs, along with a growing budget deficit, a weakened dollar, great economic uncertainty and a Federal Reserve that it might have less ammunition to fight the next crisis.
Here’s a graphical look at what has changed in the markets over the past four years and what investors need to be aware of during Biden’s tenure.
1. MARKETS UNDER TRUMP
The benchmark S&P 500 Index has risen about 68% since President Donald Trump took office. Its 73% advance since the end of March has been helped by massive fiscal and monetary stimulus, as well as expectations that COVID-19 vaccines will encourage the economic reopening.
Ultra-low yields on Treasuries – which plunged after the Fed cut interest rates to near zero – also contributed to the stocks’ increased appeal.
2. 100 DAYS
If history is any guide, the bag should give Biden a warm welcome. The S&P 500 has advanced in the first 100 calendar days in eight of the last 10 presidential terms.
Still, Biden’s first 100 days may be more tense than those of his predecessors: Although he needs to stimulate the economy quickly, the slim Democratic majority in Congress means that the final size and timeline of a proposed stimulus package of 1 , 9 trillion dollars is uncertain.
3. WHERE FOR THE DOLLAR?
Biden will inherit a dollar that has fallen 12% from last year’s highs. Its weakness helps exporters by boosting the competitiveness of US products abroad and enhances the attractiveness of stocks by making them more affordable to foreign buyers.
Regardless of the direction the currency takes, the incoming administration said it is less likely to comment on its fluctuations than Trump, who periodically charged against a strong dollar.
4. MORE DEBT
The national debt soared nearly 40% under Trump, to about $ 28 trillion, fueled by the passage of tax cuts in 2017 and a barrage of spending to cushion the economic impact of the coronavirus pandemic.
Some investors fear that an excessively clouded fiscal outlook risks tarnishing the long-term appeal of US government debt, something that could weigh on the dollar’s shine as a reserve currency.
In July, Fitch Ratings revised the US triple-A rating outlook from stable to negative, citing an erosion in credit strength.
The national debt is likely to continue to grow under Biden. Janet Yellen, his Treasury Secretary nominee, on Tuesday urged lawmakers to “act big” on the next relief package, adding that the benefits outweigh the costs of a higher debt burden.
5. INFLATED BALANCE SHEET
Biden will inherit a higher Fed balance sheet than ever due to increased spending from the pandemic.
Some fear that already lowered rates and asset purchases of $ 120 billion a month today could give the central bank less room for maneuver if the economy worsens or a new crisis hits, giving additional attention to fiscal policy.
The Fed’s balance sheet is expected to grow to $ 9.1 trillion by the end of 2021, according to a Reuters poll in December.
6. UNCERTAIN TIMES
The pandemic increased economic concerns during the final year of Trump’s term. The years prior to his tenure were marked by trade friction between the United States and China, which had an impact on asset prices.