The Biden agenda is definitely a mixed bag for investors. On the positive side, taking vigorous action to end the pandemic and address its interim impacts is a plus, the infrastructure plan will help the economy, and putting an end to capricious tariffs will also help. On the down side, the planned tax increases on corporations will probably reduce share prices, and there is a possibility of an overheated economy, interest rate increases, and a corresponding fall in stock, bond, and real estate prices.
As of today, the markets seem to be assuming all of the news will be good; the tax increases, the inflation, and the interest rate increases won’t happen, but all of the good stuff will. That could turn out to be true, in which case the Democrats should prosper in 2022. It helps that the Fed seems to be determined to cooperate, and recent history is on Biden’s side. But what if the markets are too optimistic?
There is a very reasonable possibility that we could have a major shift in wealth accumulation from investors to workers by 2022 if the Biden plan, including the minimum wage increase, is implemented in its entirety. You can easily make a case that investors (meaning, left-leaning professionals as well as right-wing capitalists) gained disproportionately from the Obama and Trump years, and that workers are entitled to their turn. Biden hasn’t made this case to the public, however, and the political implications of a significant drop in stock and bond prices prior to the election could be very substantial.