The Biden effect, Covid, return to travel and more: 7 things to watch out for in 2021


By Geoffrey Smith – The global economy is expected to rebound sharply next year after the biggest and widest economic shock in modern history in 2020. The distribution of Covid-19 vaccines is set to ban the fear of the coronavirus and of allowing a backtracking of pandemic working and consumption patterns. Central banks have pledged to keep the lid firmly on interest rates, while governments stand ready to keep borrowing and spending high to ensure viable parts of the economy do not collapse before the health situation returns to normal.

The markets are looking to the future and the fact that stock markets in the United States and much of the rest of the world are already at or near record highs suggests that this brilliant discourse has already been widely incorporated. . What happens next? Here’s a look at some of the events and themes that have the ability to shake the consensus and push the markets towards the next year.

1. The Biden effect

Everyone expects the new president to devote money to boosting the economy upon his inauguration on January 20. However, its ability to do so will depend on the outcome of the second round of the two Georgian Senate seats on January 5.

Unless the Democratic Party overturns the two up-to-date seats, the Senate will remain in Republicans’ hands for the next two years, a solid drag on the big spending ambitions of Democrats who have a majority in the House of Representatives (just watch how the Senate under the leadership of the GOP majority reduced Nancy Pelosi’s original $ 2.5 trillion plan for further stimulus to less than $ 900 billion).

In all likelihood, if Republicans retain control of the Senate, then much of Biden’s expected agenda will be unsuccessful, whether it be higher spending on infrastructure or higher taxes on capital gains. And income. A Senate that has turned a blind eye to the massive widening of the budget deficit under President Trump – even before the coronavirus disaster – could suddenly rediscover its fiscally conservative leanings.

However, Biden will have plenty of opportunities to influence stock sentiment through foreign policy, where the Senate has much less leverage. Indications are that he will attempt to restore relations with traditional American allies – thereby avoiding the risk of a trade war with Europe, but the real test will be what Biden does with import duties on Chinese goods including Biden. inherited. Expect some sort of signal early on in Biden’s presidency.

2. W (h) or Covid?

The announcement of a new strain of Covid-19 that is more contagious – if not more dangerous – than the original version may knock some of the foam out of markets by the new year, but 2021 will likely start with a ‘ “ Goldilocks ” built-in scenario – a scenario where the pandemic subsides due to the distribution of vaccines and the onset of spring, but authorities are still keeping the stimulus taps as large as possible, to prevent the central bankers call it “healing effects”.

Moderna (NASDAQ 🙂 has joined Pfizer-BioNTech to receive emergency use authorization for its drug Covid-19, and all of the following candidate vaccines will allow national health systems to deploy protection faster. The idea is that rapid protection of the most vulnerable will give governments greater confidence to keep the rest of the economy more open, while relying on a high rate of participation of the population.

Still, more than 20% of Americans polled by the Pew Institute earlier this month said they would likely refuse the vaccine, a number that could rise dramatically if some or all of the approved drugs start showing unexpected and negative side effects. In addition, it should be remembered that mutations in the virus – of which there will likely be several – can make it more difficult to definitively ban – although there is no sign yet that the new strain detected by British scientists will be resistant. drugs currently under development.

3. The rebound in travel, leisure and catering

But suppose the vaccine rollout goes according to plan, what kind of comeback can we expect next year? The consensus is for a sharp rebound, but the industry – perhaps with an eye for further support from public funds – is far from optimistic. Companies as diverse as Delta Air Lines (NYSE 🙂 Booking (NASDAQ :). Com and Hilton around the world Holdings (NYSE 🙂 has all avoided giving any form of guidance in their latest quarterly updates.

The International Air Travel Association expects the industry to lose another $ 40 billion next year, on top of the $ 120 billion this year, and only expects the number of air travel to return to 2019 levels in 2024. Tui (DE :), Europe’s largest tour operator, says 2021 will be a “year of transition,” with traffic not returning to pre-pandemic levels until 2022.

The powers that be will surely move heaven and earth to ensure that landmark events like the Tokyo Olympics and Euro soccer championships go as planned. And Tui’s numbers indicate pent-up demand for vacations is immense. At the other end of the scale. The bar and restaurant business will surely return where owners can apply good hygiene. But it is still difficult to see the circus of shows, conferences and other networking events whose goal is to increase social contacts to get their mojo back before 2022.

4. Fear of inflation

Beware of the great fear of inflation in the spring. This is when the prices of oil and discretionary goods and services really fell last year, meaning that inflation rates, which measure prices against their levels the year before, will increase sharply.

Certainly, the European Central Bank and others have already indicated that they are on the lookout for what should be nothing but failure, as the pandemic recession has left massive output gaps in advanced economies, which will keep real inflationary pressure under control for some. time. Still, there is a risk that some of the big numbers will be enough to weaken the belief that central banks can conduct ultra-loose monetary policy forever. It would be surprising if the more belligerent of the central banker crowd could refrain from talking about at least a possible need to tighten policy in the future, especially if the prices of industrial commodities like oil and cotton continue. to go back up as they’ve been doing it over the past few weeks.

5. Antitrust war on big tech

2021 is expected to be the year the antitrust war on Big Tech begins. Regulators have found that a handful of large platform companies – Alphabet (NASDAQ :), Amazon (NASDAQ :), Apple (NASDAQ :), Microsoft (NASDAQ 🙂 and Facebook (NASDAQ 🙂 – are more of control over what consumers read, watch and buy that is healthy for individuals and for society in general.

Their use of data to influence user choices, their acquisitions, and their content policies on their networks are all coming under increasing scrutiny, as evidenced by a wave of investigations and prosecutions these days. recent weeks by the Federal Trade Commission, the Department. justice and over 40 state attorneys general – not to mention the European Union.

None of the recent actions likely seem like a knockout. Businesses have obvious counter arguments that have already stood up to scrutiny. And some actions can be undermined by suspicion of partisan motives. Still, with so many diverse authorities throwing legal punches, it only seems a matter of time before one or more of them connect properly.

6. Brexit

If 2021 is likely to get off to a rough start, this is in part due to the Brexit saga, which is ultimately due to reach a resolution on January 1, as an 11-month transition period has allowed both sides to claim that the UK had not actually left the block, ends.

At the time of writing, the two sides have reached a minimum agreement that ensures neither side will face tariffs and quotas on its merchandise trade, at least to begin with. That could change if Britain uses its new sovereignty to deviate from European product and labor standards. However, companies will need to provide documentation regarding the origins of cross-border shipments, an additional degree of bureaucracy, and costs that may hold back growth, at least in the short term.

However, the deal is largely silent on services, leaving the key UK financial services sector in particular at the mercy of any future changes in European attitudes. The deal was rushed by the UK parliament on Wednesday, but still faces close scrutiny by European parliaments.

7. Iran

One area where President-elect Biden will be able to make his mark without being hampered by the Senate is relations with Iran. Biden has indicated that he wants to revert to the 2015 UN-approved Joint Comprehensive Plan of Action (JCPOA), which committed Iran to reduce its nuclear fuel enrichment, phase out its stockpiles of medium-enriched uranium and drastically reduce its enrichment capacity.

Donald Trump’s withdrawal from the deal in 2018 was part of a “maximum pressure” policy that initially crippled Iran’s oil exports, but there have been signs this year of his growing success in getting around US sanctions.

Returning to the JCPOA would facilitate the relaxation of sanctions and a much larger increase in Iranian oil exports, which remain well below historical levels. This at a time when the world oil market still failed to offset the sharp increase in inventories this spring, when oil sometimes literally could not be traded.

Absorbing this additional supply could be tricky. OPEC and its Russia-led allies will still hold 6.5 million barrels per day of offline production capacity from January, and no one will be in a rush to cede market share to Iran at a price that does not cover most of OPEC. member spending needs.


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