President Trump has pledged to visit Georgia, possibly this weekend, to help with the campaigns for the Senate run-off. Whether he tips the balance and helps secure the Senate for the Republicans remains to be seen. President-elect Biden is building a team to bridge bi-partisan divides. Janet Yellen is the ultimate example, a shrewd appointment as Treasury Secretary. The former Fed chief will make a compelling argument for targeted stimulus, to get Americans back to work.
The GDP report released this week would appear, at first glance, to provide support for the reflation thesis. But in truth, it provides a warning. Corporate profits rose strongly in Q3, and were above levels reached prior to the pandemic. However, the improvement was largely down to Federal Government largesse. Blanket, ‘all industry’ support will hold back the transformation of the US economy that the stock market has bet on this year and pushed technology stocks higher.
Ms Yellen will no doubt try to continue many of the Federal government support programmes. But a blank cheque from Congress may do more harm than good. The pandemic has accelerated and deepened the opportunities for the adoption of labour-saving technology. Once the vaccination programmes have been rolled out, the focus of the next US administration will need to be squarely on ensuring technology is allowed to ‘rip’ through the economy, allowing companies to rebuild margins that were already under significant downward pressure before Covid-19.
