In a Nutshell

We now have a new, much more liberal president. One of his first actions was to propose an additional $1.9 trillion stimulus package that includes $1,400 per-person direct payments to most households, a $400 per week unemployment insurance supplement through September, as well as funds for COVID testing, vaccine distribution and bail-outs for financially distressed state and local governments. This proposal is apparently the first phase of a two-part strategy, with a broader program to be unveiled in subsequent weeks focused on infrastructure and climate change. However, his plan is being challenged.

This Democrat Party wish list includes ideas that Republicans have rejected, including raising the minimum wage to $15 an hour. Some of the new administration’s proposed legislation will likely need 60 votes in the Senate to be approved. That would require several GOP Senators to support these extravagant expenditures.  “Joe Biden did not propose a COVID package tonight – he proposed a liberal takeover of the American economy,” said Rep. Jason Smith (R., Mo.), the top Republican on the House Budget Committee. “Americans aren’t asking for trillions of dollars in new spending. They just want our government to open our economy, get their kids back to school, and create jobs.”

Maybe the best news is that much of the uncertainty surrounding the stock market has been eliminated. There are now multiple Covid-19 vaccines, Brexit is completed, a second wave of stimulus checks are in the mail, and the Fed will probably keep key interest rates at or near 0% through 2023. Additionally, year-over-year quarterly financial comparisons in 2021 should be favorable; and, the Biden Administration will likely endure minimal criticism for its first 100 days (because most of the media will support him no matter what happens).  Foreseeing possibly smoother markets ahead, the major market indexes all closed up in 2020, some by a little (Dow, +7.3%), some by a lot (NASDAQ, +43.6%), with the S&P 500 in the middle (+16.3%).

China (specifically the Chinese Communist Party) may be the biggest winner in the USA’s Presidential election, as the globalists that are staffing the Biden Administration are expected to be friendly to Communist China as well as our past allies in Asia, Canada, Latin America, Europe, India, and the Middle East (mostly).  In addition, climate change seems to be a top priority for the Biden Administration, which means that the U.S. will likely rejoin the questionable Paris Climate Accord.  Another top Biden priority seems to be picking up the pace of processing “asylum seekers” on our Southern border.

While many in the far-left wing of the Democratic Party are calling for more socialism and a Green New Deal, one key to future American prosperity is to retain federalism in our Constitution, allowing all 50 states to be competitive laboratories for luring corporations to their state, effectively allowing more business-friendly states to remain massive economic “free enterprise” zones. Some states, like Florida and Texas, are very pro-business, while other states, like California and New York, continue to punish businesses.  If this continues expect an ongoing exodus of businesses to more pro-business states.

Companies like Goldman Sachs, Hewlett-Packard, Oracle, and Tesla are leading the flight to more pro-business states, with Texas being the clear winner in recent years.  No matter who is president, one thing with the potential to “keep America great” is that many of our 50 states strive to lure businesses from other states with tax incentives, more educated workforces, and other pro-business incentives.  Also, during the Covid-19 disaster, several “blue” states shut down most businesses instead of working with those businesses (to allow them to remain open for business as safely as possible).

Due to the ongoing precarious nature of the U.S. economy as we recover from Covid-19, the Biden Administration is not expected to significantly increase income taxes for the first two years.  I also hope that Biden’s Administration will not significantly increase the favorable tax rates on qualified dividends or capital gains either.

Potentially 2021 is shaping up to be a positive year despite the ongoing BS in Washington– at least early in the year.  As millions of Americans hopefully get vaccinated each month, more states are expected to slowly but steadily lift their draconian coronavirus restrictions.  Due to favorable year-over-year comparisons, as well as higher trading volume due to new pension funding and other seasonal factors, I expect that the stock market will have a strong first quarter, as well as likely appreciation through May.  However, there could be some consolidation in mid-February as the fourth-quarter announcement season winds down.  Otherwise, 2021 could be shaping up to be another very strong stock market year.