With less than 60 days from inauguration day, US president-elect Joe Biden is certainly not frittering away, nominating personnel which shall ultimately help him deliver on his electoral promises.
Apart from promises related to cleaner energy which shall ultimately contribute towards climate change and improved foreign relations with its trading partners, president-elect pledged a large fiscal package. A package which is set to alleviate the US economy from the economic despair brought about by the unprecedented COVID-19 pandemic.
In-part funded by tax hikes, a Biden administration is expected to boost spending on both infrastructure and energy to support US economic growth. Albeit perhaps difficult to immediately implement as he initiates his four-year term in administration, the probability of the president-elect, successfully getting a sizeable package passed early in the new year – either by getting a majority vote or by working alongside several Republicans in Congress, is high.
Aiding Joe Biden delivering on the latter promise is the appointment of Janet Yellen, former chair of the Federal Reserve (Fed) who has not shied away from stimulus, as his Treasury Secretary and ultimately at the helm of his economic policy.
To clarify thoughts, a Treasury Secretary acts as a principal advisor to the President and the Cabinet on economic issues, makes recommendations on tax policies, and participates in formulating broad fiscal policies – three topics widely discussed by Biden prior to the US election.
Albeit Yellen is yet set to be confirmed and tested in her Senate confirmation hearings, particularly on her views on both stimulus spending and her less confrontational position towards China – a topic of great interest under Trump’s administration, many expressed their backing, supporting the decision. Notably, President Trump’s former National Economic Council director, Gary Cohn, praised Biden’s choice, tweeting, "I have no doubt she will be the steady hand we need to promote an economy that works for everyone, especially during these difficult times."
The move, widely portrayed as one to help revive the world’s biggest economy, went down well, boosting markets.
What to expect?
Greater unity: Following recent disagreements between the Fed and the Treasury, initiated by Steven Mnuchin’s willingness to extend several crisis-lending programs, Yellen’s first step is expected to seek unity once again, putting a unified front. On this matter, her previous working relationship with Jerome Powell; Chair of the Federal Reserve shall undoubtedly help.
Fiscal stimulus: Yellen’s position on loose fiscal policy is very clear, that of a policy of lower-for-longer interest rates coinciding with even greater government spending – an ideology very much aligned with Biden’s pre-electoral promise.
China: Under a Trump administration China was certainly at the forefront of his political and economic agenda. Albeit the topic shall remain of interest going forward, with Biden as president and Yellen believing China was not to blame for America’s trade deficit, the issue shall somewhat be dealt with differently, certainly in a more diplomatic manner.
Undoubtedly, Yellen’s experience shall prove critical in helping steer the country out of an economic crisis, fuelled by the coronavirus pandemic which led to increased unemployment and a deterioration in economic figures. We highly consider the move to be beneficial, affirming president-elect’s intentions of instigating economic growth through increased spending.
Disclaimer: This article was written by Christopher Cutajar, credit analyst at Calamatta Cuschieri. The article is issued by Calamatta Cuschieri Investment Services Ltd and is licensed to conduct investment services business under the Investments Services Act by the MFSA and is also registered as a Tied Insurance Intermediary under the Insurance Distribution Act 2018. For more information visit www.cc.com.mt.
The information, view and opinions provided in this article are being provided solely for educational and informational purposes and should not be construed as investment advice, advice concerning particular investments or investment decisions, or tax or legal advice.