President Joe Biden has spent his first 100 days in office tackling two goals: pulling the country from the depths of the coronavirus crisis and reshaping broad swaths of the U.S. economy.
Since he was inaugurated Jan. 20, Biden has tackled climate change, promoted oversight of the financial industry, supported pandemic-hammered businesses and issued stimulus checks to consumers. His administration is also urging Congress to pass legislation to boost corporate taxes and pump trillions into a range of infrastructure proposals through the American Jobs Plan.
Businesses have largely applauded portions of Biden’s sweeping agenda that eye pumping more stimulus into the economy and creating new opportunities across sectors. But many industries remain on edge as the administration eyes greater oversight and changes to tax laws that could eat into corporate earnings and capital gains. That being said, it is important to remember that Biden faces political hurdles in Congress so it remains to be seen how many of his proposals will actually become law.
The prospects of recovery have helped markets climb to record highs in recent months. The S&P 500 has risen 8.7% during Biden’s first days in office as all sectors within the index are posting positive returns.
Continuing waves of government spending have also pushed up expectations that inflation will boom, while the Federal Reserve targets even greater economic gains as its support for the economy persists.
“We’re headed for a burst of inflation. Now exactly how high it’s going to get remains to be seen,” James Angel, an associate professor at Georgetown University’s McDonough School of Business, said in an interview.
Climate comes into focus
Biden wasted no time on action to meet climate and clean energy goals, something that could prove especially important given the short window before the 2022 midterm elections, said Kevin Book, managing director of research firm ClearView Energy Partners LLC.
“The amount of action, the amount of activity in the first 100 days is very significant. From a political perspective, generating momentum is important because there is only so much time in a president’s honeymoon, and I think those honeymoons have been getting shorter,” Book said.
Clean energy advocates have applauded Biden’s climate initiatives, but fossil fuel producers are on edge. The administration put climate change at the center of U.S. domestic, national security and foreign policy.
The U.S. rejoined the global Paris Agreement on climate change in February, and Biden recently announced a new committment under the agreement for the U.S. to reduce its net greenhouse gas emissions by 50% to 52% from 2005 levels by 2030.
Biden’s proposed infrastructure plan includes funding to modernize the electric grid and expand deployment of electric vehicles. It also endorsed a national clean electricity standard, proposed 10-year extensions to clean energy tax credits, and sought additional federal funding for research and development of zero-emission energy technologies.
Both the renewed Paris commitment and infrastructure plan are part of Biden’s goals to decarbonize the power sector by 2035 and achieve net-zero emissions economywide by 2050.
Immediately after entering the White House, Biden canceled a presidential permit for the Keystone XL crude pipeline. In addition, the Interior Department under Biden paused new oil and gas leases in federal areas pending a review.
Financial system under review
Isaac Boltansky, director of policy research at Compass Point Research & Trading LLC, said Biden’s swift moves to combat the virus and roll out stimulus measures have had a positive impact on the financial services industry.
“The first 100 days have been completely in line with expectations and broadly positive, but the following 1,361 days of this term could be more mixed for the industry as the agenda expands beyond the virus,” Boltanksy said.
The SEC aims to take a more aggressive approach to climate risk in the financial system in the coming years, while the agency is also looking into controversial practices such as payment for order flow to disclose disparities around family offices and the recent boom of special purpose acquisition companies.
The White House has also announced reforms to better target the smallest businesses for Paycheck Protection Program loans and has extended the application deadline to the end of May.
Elsewhere, policymakers are looking into the relationship between banks and financial technology firms. The two have partnered, allowing fintechs to avoid state usury laws and charge high interest rates on loans. In other cases, banks and fintechs are competing for customers.
“Big banks have complained that fintechs are getting less oversight and weaker regulation than they are, and it seems that argument is resonating — ironically — with some Democrats, who aren’t traditionally sympathetic to big banks,” said Ian Katz, managing director at Capital Alpha Partners.
The Consumer Financial Protection Bureau is pushing rules to help prevent avoidable foreclosures and help tenants stay in rentals. The agency also rescinded a Trump-era policy statement on abuse, clearing the way for stronger and more frequent crackdowns.
Treasury Secretary Janet Yellen has also said the Financial Stability Oversight Council, which she chairs and which includes several regulatory agencies, will coordinate on actions to prepare markets for a transition to greener energy sources.
Stage set for supply chain action
Biden’s infrastructure plan calls for $100 billion to support onshoring semiconductors and other manufacturing. Resolving an ongoing shortage of the chips will likely take the rest of the year, said Chris Rogers, supply chain analyst with Panjiva.
A steady shift toward firm industrial policies may take much of the rest of 2021 to put into place and risks competition from other countries, according to Panjiva.
The pandemic has also brought medical supply chains into focus because of the pandemic. The administration initially refused to export vaccines before loaning doses to Canada and Mexico. The U.S. is providing COVID-19 vaccine materials to India after the country flagged restrictions in exports in April.
Biden’s team is also reviewing trade policies as it leaves many existing tariff measures in place.
“Deals that were underway with the U.K. and Brazil by the Trump administration have been slow-walked, while a cooperation agreement with Japan may be a sign of the road ahead. Unless the Biden administration calls for a renewal of Trade Promotion Authority in July, it’s unlikely that any new trade agreements will be reached during the administration,” Rogers said in an email.
Reengagement with the World Trade Organization does bring prospects of reform later in the year, Rogers said.
Healthcare, insurance get closer examination
Biden’s strategy for economic recovery has relied on making vaccines from Pfizer Inc., Moderna Inc. and Johnson & Johnson available to all adults, a target hit earlier in April.
The industry has engendered goodwill for its role in tackling the pandemic, but the U.S. Federal Trade Commission wants to include effects on drug prices and access to its review of pharmaceutical deals which could impact deal volumes and values.
Biden’s infrastructure plan includes billions of dollars to fight future pandemics, using lessons from the past year to fortify drug and vaccine development, onshore pharmaceutical manufacturing, and enhance hospitals and digital networks in the U.S.
The American Rescue Plan provided funding to expand the fight against COVID-19 while also expanding subsidies, and it extended applications for enrollment in Affordable Care Act insurance exchanges.
Democrats in Congress are also seeking to expand Medicare eligibility to those aged 50 and older and are hopeful that Biden will support the plan.
Katherine Hempstead, a senior policy adviser for the Robert Wood Johnson Foundation, said the challenge for Biden’s team will be to make many of its changes to healthcare and insurance permanent. That opportunity should come in the summer or fall, most likely through reconciliation in Congress, she said.
“People are talking about drug prices, making the expansions permanent, doing something that closes the Medicaid coverage gap, maybe even expanding Medicare eligibility. So there’s a lot in play,” Hempstead said in an interview.
Beyond healthcare, new Federal Emergency Management Agency rules will change how insurance premiums are priced relative to flood risk and seek to equalize what policyholders pay for flood coverage.
Additionally, Biden’s infrastructure plan calls for $100 billion to bring affordable, “future-proof” broadband to all Americans, prioritizing support for networks owned or operated by local governments, nonprofits and cooperatives. The proposal has some industry observers concerned that the administration is moving toward utility-style regulation.
However, the funding could be a boon for real estate investment trusts that own data centers and communications towers, including Digital Realty Trust Inc., Equinix Inc. and American Tower Corp. Biden’s infrastructure plan would also encourage apartment construction by supporting efforts to curb local single-family zoning rules, a proposal lauded by real estate industry groups.
The taxman cometh
During his April 28 address to Congress, Biden reiterated a pitch to raise the top federal capital gains tax from 20% to 39.6% on the richest U.S. taxpayers. The tax, which would apply to taxpayers with an annual income exceeding $1 million, would need approval from Congress. The administration is also eyeing pushing the top tax bracket for those making $400,000 or more per year to 39.6%, where it sat prior to the enactment of 2017’s Tax Cuts and Jobs Act, which cut the top rate to 37%.
Biden has also proposed raising the corporate tax rate to 28%, from 21%, where it was slashed by the Trump tax cuts but still seven percentage points lower than what it was during the Obama administration. Biden’s team has also proposed doubling taxes on foreign earning through the Global Intangible Low-Taxed Income rate to 21% and a new 15% corporate minimum tax on companies with more than $100 million in annual income.
Analysts see the looming changes to the tax code as a major hindrance to growth in nearly all market sectors.
“Our view is that the real targets of Biden’s policy are the highly valued, reputedly highly profitable global companies that Democrats argue got a free pass under the [Trump administration’s Tax Cuts and Jobs Act],” James Lucier, managing director at Capital Alpha, said in an email.
If all corporate tax policies were implemented, EPS of S&P 500 companies would see a decline of about 9% in 2022, according to a Goldman Sachs analysis.
Given Democrats’ slim majority in Congress, a tax increase to 25% is more likely, Lucier said. Efforts such as a 15% corporate minimum tax on companies with more than $100 million in annual income and doubling taxes on foreign earnings may never gain traction, Lucier said.
Morgan Frey, Michael Gibney, Michael O’Connor, Jake Mooney, Matt Blumenfeld, Hailey Ross, Sarah Barry James, Ellie Potter, Tom Jacobs, Declan Harty, Alison Bennett, Molly Christian, Brian Scheid, Sean Longoria and Polo Rocha contributed to this article.
Panjiva is a business line of S&P Global Market Intelligence, a division of S&P Global Inc.