What to expect from Biden’s first 100 days in office

Regulatory and tax changes are likely – and antitrust litigation regarding tech companies is something to keep an eye on in terms of fund regulations: Adriaan Pask, PSG Wealth.

CIARAN RYAN: Joe Biden has just taken up his seat in the US White House and spent his first days in office cranking out executive orders to, in some cases, undo policies implemented by his predecessor, Donald Trump. One of those was to rejoin the World Health Organisation. But some of those executive orders were intended to deliver on election promises such as Covid healthcare assistance. We’re taking a look at what to expect from Biden’s first 100 days in office, and joining us to discuss this is Adriaan Pask, who is chief investment officer at PSG Wealth.

First of all, welcome Adriaan. Tell us, what do you think Biden is going to do in his first 100 days in office, specifically with regard to regulations and taxes?

ADRIAAN PASK: Hi, Ciaran, and thanks again for having me. I think in particular tax is a very interesting one, because we know it was a very critical ingredient in Trump’s time. I think what we should expect are increases in corporate taxes. It’s something that’s formed part of his campaign – and then even personal income taxes at the higher end. So, it does feel like everything that’s been communicated thus far on the taxes side is tilted towards something similar to a wealth type of tax. So, the things that are being targeted are personal income taxes, for example [those with incomes] above $400 000 per annum are likely to see a tax increase. So, you could see that segment comprises high net worth individuals. Obviously, you can imagine how those proceeds will be allocated in terms of inequality, because that’s been something that’s been topical.

I’ve mentioned the corporate taxes. And then I think the other important component as far as taxes go is the hiking in capital gains tax for individuals making more than $1 million per year. So, it’s very clear that a higher tax base is being targeted.

As far as regulations are concerned, a lot of what we’ve seen thus far revolves around I guess what you could call Obama-era elements – things relating to the environment, consumer protection and labour. There’s already been talk of the minimum wage – wanting to double the minimum wage from where it stands up to $15/hour. So, I think those are the key elements in terms of regulations and taxes.

Maybe, as a last point, you can include there, in terms of weird impacts, corporates.

We know of the antitrust litigation that’s going on with some of the larger tech companies in the US, so that’s also something to keep an eye on in terms of fund regulations.

CIARAN RYAN: Okay, let’s talk about the economy. The US economy is bleeding at the moment. We saw a 33% drop in US GDP in the third quarter of last year. What do you expect is Biden’s plan for the economy and how to recover it? And, specifically with regard to fiscal and monetary policy, what do you expect him to do?

ADRIAAN PASK: I think that one is fairly transparent. We did see a couple of weeks ago Biden coming out with his stimulus plan of $1.9 trillion. So it looks like the angle here is stimulus, stimulus and more stimulus. Again, if you look at the deconstruction of that stimulus plan, [where] a lot of the effort is aimed at the lower income earners, additional cheques for individuals form a key part of that, unemployment benefits – the typical things that you could expect under relief. So, I think the first aim under the stimulus plan is just to make sure that individuals and small businesses make it through to the other side. That’s really an important part of it.

As for monetary policy, I think we can see the reappointment of [former US secretary of state Colin] Powell taking place. And then on monetary policy I don’t think that’s heading up anytime soon in terms of interest-rate hikes. If you are still stimulating the economy with fiscal stimulus to the extent that you are, I think it’s very difficult to increase rates. And on the other end there’s very little room to lower them any further. So probably more stable there.

I think last year was really all about all about monetary policy globally, just reducing rates, getting capital into the economy. I think we’ll see more direct stimulus through fiscal support, especially in the US this year.

CIARAN RYAN: How quickly do you think Biden will act on the US-China trade war, which turned quite toxic under president Trump?

ADRIAAN PASK: Yes, I think that’s something that’s really important. Unfortunately, there are still two schools of thought on this. There’s one camp that says, well, let’s focus on restoring the whole relationship, and on the other side they say, well, a lot of work has been done to add pressure there, and China has retaliated. It’s a very difficult situation to find yourself in, trying to reverse some of those measures that have been implemented. I think at the very minimum it would be fair to say that the approach will be far more diplomatic in nature. Trump had a very specific way of doing things; his nature is a lot more assertive, if you can call it that. Under Biden I think the approach will be different, but the aims quite similar – defend US firms and make sure that there is fair trade between the nations, and so on. So I think that one is still up in the air but, as I say, I think the approach will be very different.

CIARAN RYAN: All right, we’ve just come through a very, very contentious US election in November, and really you seem to have an extremely divided country at the moment. Do you think Biden is going to be able to repair relations between the two opposing camps, or is this something that’s now fairly embedded within the US political system – this divisiveness between right and left?

ADRIAAN PASK: Well, I think it’s something that’s happening globally and what’s happened here is purely just that. The spotlight is being placed on it. It’s been something that’s been around for a very long period of time in terms of inequality. Something that we see globally and, as I say, for a prolonged period of time [is] what’s happened with Trump. And even if you go back to some of the other elections that have taken place globally over the last five-odd years, it seems to be a cornerstone of the agenda that is implemented to try and gain more votes. But there is large-scale inequality in the US as well, and you can see it’s bubbling over. And to a large extent Trump has mobilised some of that thinking into far more visible actions from that population base.

But from Biden’s perspective I think he’s doing the right thing to try and address some of those concerns through the tax amendments that I referred to earlier – making sure that the lower end of the tax base is supported with aid. And that’s what we see now. So a lot of the stimulus plan is focused on that. We’ll see the tax cuts on personal income tax on the middle end, and on the high end we’ll see more taxes. And on the corporate end we’ll see more taxes. So, it is redistributing effectively some of that wealth to try and put a damper on some of the rhetoric that’s going on.

But it’s also more than the populism angle, I think. There are many things in America that make it quite complicated, especially as we saw in the Black Lives Matter campaign – a lot of [attention] around the racially motivated injustices on the part of the police. And we’ve already seen that Biden will institute a national police oversight commission, and there’s also additional funding going into that area. And he’s been visible about that.

So, I think he’s doing what he can but, to be quite fair, you don’t create an unequal society in one term under Trump. I think that’s something that’s come a very long way and it’s unlikely that Biden will be able to reverse it. I think he’ll do well just to indicate that he is making moves in the right direction, and some of these initiatives do speak directly to that.

CIARAN RYAN: All right, Adriaan, final question. What do you expect Biden to do regarding international relations? There have been some stressors that have developed between the United States and some of its partners and allies. What do you think his foreign policy is going to be?

ADRIAAN PASK: With regard to foreign policies Biden did pledge to restore the broken relations with foreign allies. The aim is to hasten an international democratic summit within the first year of being in office. So I think that again indicates that he is out to restore – again, a very positive message. And I think that’s great.

So, from a market and investor perspective, I think we can see less turbulence. The whole China debate is still a little bit up in the air. As I said earlier, the approach will probably be a whole lot better. Unfortunately, there’s so much history in terms of trade changes that were made and retaliation that took place. It’s going to be very interesting to see how the two parties navigate that situation going forward. But we’ve even seen people like [Treasury Secretary] Janet Yellen being quite vocal on the fairness of how US firms are being treated by Chinese authorities. I think she’s quite level-headed. So it’s one of those things that you can’t completely back off from, but at the same time we can’t continue with the same approach that we followed under Trump, because I think that was really leading things to an ugly place.

CIARAN RYAN: All right. We’re headed for an interesting few months. That was Adriaan Pask, chief investment officer at PSG Wealth.

Brought to you by PSG Wealth.



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