Can Biden’s Climate Plan Stimulate the Economy?

January 26, 2021 James Heinsman Hedge Fund News

Wall Street opened the first full week of the Biden presidency with record highs for the S&P and Nasdaq, caution on the part of investors who focus on financial, energy and industrial shares and a push by climate change activists for the new administration to make good on campaign pledge to jumpstart the economy by investing in renewable energy programs.

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Ross Mayfield, an investment analyst at Baird Private Wealth Management,  told Yahoo Finance that while Monday’s spike was predictable, the period of economic volatility is far from over.

“Today has been really been a continuation of what we saw last week, where the cyclical rotation that had really gone vertical since the Pfizer vaccine was first announced in November kind of took a pause, and you saw a little bit of reassertion from some of the Big Tech names,” Mayfield said

“The cyclical rotation that was predicated on kind of an economic boom in 2021 … I think that still makes sense, I think we’re still on a path to that, but it was never going to be a truly straight line given the headline volatility that we see given the pandemic on the ground,” he added.

Of course, markets normally react cautiously to political change. That is especially true in the current climate, when the shift between the outgoing and incoming administrations is particularly sharp: During the Trump administration, energy policy focused largely on oil and gas drilling.

Conversely, as a candidate, President Biden famously said “When I hear the words ‘climate change,’ I hear jobs,” a statement that led experts to predict that Biden’s election would hurt oil companies.

Biden pledged to channel up to $1.7 trillion over 10 years, mainly via tax credits, for green R&D. The plan calls for investments in electric cars, battery-storage technology, updating the nation’s electric grid and infrastructure to reduce their carbon footprint, a nationwide program to facilitate the charging of electric vehicles and more.

President Biden has also pledged cash incentives for consumers and homeowners who switch to renewable energy sources by installing solar panels to heat their homes, trade in gas-guzzling cars for electric models and to raise fuel-efficiency standards for traditional gasoline automobile manufacturers.

The last initiative would force American automakers to close the gap between Detroit and their European competitors.

Despite the far-reaching plans, however, it is far from clear that the new administration will be able to get the program off the ground. For one thing, it isn’t the top item on the president’s economic to-do list: That would be convincing a hesitant Congress to pass a mammoth $1.9 trillion relief package to mitigate the economic damage the  Covid-19 pandemic has caused to American families.

The renewable energy initiative will also take a back seat to Biden’s pledge to bolster a nationwide vaccination program in order to address the pandemic that shows no signs of abating in the United States.  

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