Displaying items by tag: biden

(Washington)

It is not even close to approved yet, but the Biden infrastructure deal has been making serious waves. The implications of the deal are large and would send trillions of government dollars flowing into the private sector. With that in mind, here are four stocks that look like big winners from the package: Eaton Corporation (ETN), Jacobs Engineering Group (J), Herc Holdings (HRI), Mastec (MTZ). Three of these companies (other than HRI) are engineering/construction oriented, which makes sense. Herc Holdings is a rental company that leases vehicles (yes, the Hertz that went bankrupt last year).

FINSUM: Herc is interesting to us because they rent construction and earth-moving equipment. This injection of government dollars would flow through to them and provide a nice hedge against the headwind of the pandemic, which has slowed down retail car rental.

(Washington)

The infrastructure bill is not only making waves in Washington, but also on stock exchanges. The bill is going to send many stocks surging, but here are six names that look likely to do very well if the current plan passes, with a particular focus on semiconductors. One little known detail is that the Biden plan earmarks $50 bn for the US semiconductor industry and an extra ~$175 bn for electric vehicles, which will also help semiconductors. Accordingly, check out these stocks, all of which seem like good candidates for appreciation: Vishay Intertechnology (VSH), Applied Materials (AMAT), Macom Technology Solutions Holdings (MTSI), Micron Technology (MU), Analog Devices (ADI), Maxim Integrated (MXIM).

FINSUM: The semiconductor industry has been lobbying for this to help increase its eroding market share versus China and it seems like the Biden plan will deliver.

(Washington)

Biden’s new proposed $2 tn infrastructure package is a gargantuan bill (coming right after the newest pandemic relief package) that will have significant effects on stocks generally, and specific ones more narrowly. The plan is so big that it harkens back to 1950s era spending. Barron’s described it best, saying “At 10% of current gross domestic product, doled out over eight years, the plan reads like a Rooseveltian blueprint for economic and social engineering”. The big winners are pretty clear: infrastructure stocks, and more specifically construction and industrials. The Invesco DWA Industrials Momentum (PRN) and the Industrial Select Sector SPDR (XLI) are great ways to play the rise in these types of shares, with the latter offering more large-cap exposure. In terms of specific names, look for MasTec, Aecom, and Jacobs Engineering Group.

FINSUM: Biden is setting up infrastructure stocks to have a golden run over the next few years. As the package inches closer to passing, these sectors should rise.

(Washington)

Investors may fear it, but we all know the big tax package is coming. Personal income tax rates, and likely business rates will rise. State and local taxes will be affected too. So one big question is how this will pay out for muni bonds. The answer, at least according to Franklin Templeton, is that munis are going to do great. The reason why could not be simpler: with tax rates rising, the relative value of munis rises since their tax exempt status because relatively more valuable.

FINSUM: Anxiety about the forthcoming tax plan is rising, and that is a great tailwind for munis. Couple that with the fact that Democrats are more in favor of federal support for municipalities and you have a great combination for muni bonds.

(Washington)

One of Biden’s most important campaign promises was that he would not raise taxes on the middle class, or more specifically those earning less than $400,000. Accordingly, it is a surprise to see a new proposal from Democrats that would do exactly that. Biden and the Democrats appear to be going after “stepped up basis” in inheritance taxes as a way to raise tax revenue and fund the infrastructure bill. Right now, when inherited assets get transferred, their basis resets to whatever the market value is at the time of inheritance. In this way, heirs only pay capital gains on the increase in value that occurs while they hold the asset. Biden and his administration wants to change the rules in order to keep the basis in place from when the original buyer purchased the asset. This change would not only affect the wealthy in a big way, but also the middle class, as the basis for many assets would suddenly be very low, meaning large taxes would be due no matter the size of the estate being transferred. A good example might be an inherited condo from a parent that was bought 30 years ago and has appreciated from $100,000 at purchase to $600,000 now. Under the current system, a middle class earner who inherited and decided to immediately sell the condo would pay almost no taxes. However, under the new proposal, almost $100,000 in taxes would be due because basis would be applied to the original purchase price!

FINSUM: This is a big change that advisors need to be watching closely!