The new administration will have its hands filled with Covid-19 cases skyrocketing and small businesses being clubbed while half the country truly seems to hate each other.
It's sobering but it's not all bad for the stock market in part because companies will no longer have to play with one hand tied behind their backs and in part because so many companies' CEOs never believed in the Trump agenda anyway. Sure, they loved tax cuts. But they truly disagreed with many of the president's positions and are unhesitatingly looking forward to a new, more predictable regime.
Let me say from the outside, I do not share their views. I wanted the President to prosecute a trade war in a thoughtful and powerful way, making it clear to the Chinese that the days of their stealing our jobs and our intellectual property are over. I thought we had the Chinese in a weakened position and that we were, at last, demonstrating that we aren't craven capitalists who would sell out our people on the altar of profits from China. It was that plus the low employment that were hallmarks of the economic work that was undeniably positive for the majority of workers and shareholders, in my opinion, one not shared by many Biden supporters.
But Covid destroyed much of that. It sent unemployment skyrocketing and because China is a dictatorship the PRC was able to get Covid under control quickly by using masks and contact tracing and testing and social distancing, four weapons that our country is split on using. The PRC runs the country. We delegated the issue to 50 states which was ill-advised from a public health standpoint even if you are a diehard states' righter.
Now because Biden is not a China cold warrior, I believe we will go back to the way we were before Trump. I expect phased out tariffs. I expect good will gestures from China that will make it so Boeing (BA) is the stock to own in 2021 I think that those who believed that Apple (AAPL) was always about to lose Greater China will now be allowed to win its fair share of cellphones. Expect M&A to be approved rapidly. Most important, you want to own the companies that do big business in China, namely Starbucks (SBUX) , Otis (OTIS) and Nike (NKE) , but also 3M (MMM) , Procter (PG) , Honeywell (HON) and, most of the semiconductor companies. It's a win for large companies that sell into China and you can boost the multiple you pay for those earnings because Biden will not unilaterally decide anything about China.
Second, U.S. companies are not eager to move jobs overseas. I don't expect an instant change there. But I don't think that Biden has any of the zeal Trump had about singling out and embarrassing company CEOs for shutting plants. Again, I actually liked that, but I am not a CEO. I think that if there is a plant to be built overseas by GM (GM) to capitalize on some trend, it's going to happen. Same with most exporters. A less emotional and erratic administration will allow execs to plan how to regain business overseas.
Finally, I can't tell you how many CEOs were totally contemptuous of the President's attitude toward the environment, with the most adamant being those in the auto, utility and every single technology company I talked to, and I talked to many.
Biden is much less wedded to drilling all over the place, again, something that's good for the industry's profits because it props up prices. The oil stocks will do better here. I like Chevron (CVX) and Pioneer (PXD) for those who can't help themselves.
I know many of you support electric vehicles ad there are plenty of companies involved in that which will only be encouraged by Biden. Same with solar and same with hydrogen and wind. You will see these stocks go relentlessly higher because younger investors love them and the ETFs that group them. Why not? The International Energy Agency says that wind and solar will overtake gas capacity in 2023 and coal in 2024.
So, it may be counterintuitive given how well the stock market's been doing, but it might be doing even better without the policies that were anti-environmental, anti-China, and anti-import even as the intentions were otherwise.
(BA, AAPL, SBUX, NKE, and HON are holdings in Jim Cramer's Action Alerts PLUS member club. Want to be alerted before Jim Cramer buys or sells these stocks? Learn more now.)
