America’s 46th president is set to take office, and has his work cut out for him when he officially begins his duties. Joe Biden is inheriting the US economy at a unique juncture. The four years since Donald Trump’s 2016 election victory have seen the markets rising strongly with many record-breaking gains, despite volatility. But US stocks are not the only things spiking to all-time highs — US coronavirus cases are too. Biden is starting his term faced with the worst public health crisis in memory, along with the massive collateral financial damage that the pandemic has left, and is still leaving, in its wake.
When is Inauguration Day 2021?
The inauguration is the event where the US president-elect and vice-president elect are sworn in, and is surrounded by many festivities. As per American tradition and constitutional amendment, Biden will take his oath of office at noon on January 20th on Capitol Hill in Washington, DC.
What can we expect from the markets following Joe Biden’s presidential inauguration? Let’s take a look at how the markets have fared following previous inaugurations, how stocks have performed in the period between election and inauguration and what has happened during a new president’s first hundred days on the job.
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How new presidents affect the US stock market
In the days following Biden’s victory, the end of election uncertainty, together with positive reports from late-stage COVID-19 vaccine trials, boosted the SPX500 a little over 5%. This gain actually marked the index’s best post-election week in at least four decades.
Looking at the period between Election Day and the presidential inauguration, we can see that the markets clearly surged more in the months ahead of President Donald Trump’s inauguration than that of other president-elects. Promises of tax cuts that would boost growth prompted the SPX500 to rise 5.8%.
The markets have generally welcomed new US presidents positively. The SPX500 has registered gains during the first 100 days of eight out of the last ten presidential terms. But this is not necessarily due to inauguration. The index in that period has performed higher in most cases, regardless of whether a new president had been inaugurated or if it was a second term.
What about Biden’s Presidential Inauguration?
The transition between administrations when a new president takes office is always a delicate matter, especially when the transfer of power takes place between different political parties. But this time we have the added complications of a pandemic, which greatly affects the economy as well as limiting measures that might otherwise be taken to stimulate it in times of normal recession. Add to this Trump’s reticence to relinquish his position and Biden’s claims that his transition into the White House has been met with “roadblocks,” rather than a spirit of cooperation.
New hopes for the incoming administration
Not all is bleak, however. The Federal Reserve will likely continue to provide major support for markets at the start of Biden’s presidency, as it has for most of 2020, which in turn would continue to boost investor confidence.
Regarding COVID-19, Biden has already demonstrated a more hands-on approach to the pandemic than Trump. The president-elect, and Vice President-elect Kamala Harris had both received the vaccine before Trump. In contrast to his predecessor, Biden has been more forthcoming about measures he plans to implement during his first 100 days as president, including the distribution of 100 million vaccine shots, opening most K-8 schools, and actively encouraging all Americans to wear masks.
There are also possible hopes for improved US-China relations, as Biden has stated that trade policy will be a ‘critical pillar’ of his administration’s foreign policy.
The extraordinary uncertainty that will be greeting President Biden on January 20th has investors watching closely. There is indeed much speculation, and many unanswered questions. In the long run, however, the US stock market tends to go up regardless of who is in office.
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