Market Watchers Hope Steadier Leadership Will Propel Growth

Nigel Green, chief executive and founder of deVere Group, is one of the market watchers applauding the nomination—and expected confirmation—of Janet Yellen as U.S. Treasury secretary.

Should she win Senate approval, Yellen will become the first person to have served as Treasury secretary, chair of the White House Council of Economic Advisers and chair of the Federal Reserve. In Green’s estimation, Yellen’s experience and steady leadership should help stock markets reach record highs during 2021.

“Today’s political pageantry in Washington represents the dawning of an era of renewed certainty, stability and the return to established norms, all of which the markets approve,” Green suggests, referring to Inauguration Day. “Investors’ focus is now already on Janet Yellen, who will take over from Steve Mnuchin as U.S. Treasury secretary.”

As Green recalls, Yellen’s first day of confirmation testimony occurred in Congress on Tuesday, and the former Federal Reserve chair called on lawmakers to “act big” on coronavirus stimulus, especially with interest rates being at historic lows. Green says Yellen will stick to this message in the coming weeks and months, as the Biden administration’s 100-day vaccination blitz unfolds.

“At the Fed, she continually made the case for full employment, meaning we know already, her track record proves it, that she is prepared to spend,” Green says. “With Ms. Yellen in charge and with an economy that needs a shot in the arm, I think we can expect massive spending combined with continued ultra-low interest rates for years. This will act as a catalyst for stock markets.”

Importantly, Green warns against blind optimism, as the nation and the world continue to grapple with a deadly pandemic and deep internal and international political tensions.

“Investors should ride the Biden bounce in the markets—but do so judiciously,” he suggests. “There will be peaks and troughs as always, but with these policies and greater stability in the White House, I believe, we could see markets produce even higher highs in 2021 than in 2020.”

John Vail, chief global strategist at Nikko Asset Management, says the coming years will undoubtedly bring more progressive policies to the fore—a fact that can both buoy and hinder markets.

“The proposed Cabinet definitely has a progressive tilt,” Vail says. “Even Janet Yellen, who seems centrist and certainly is respected, certainly has strong progressive credentials. Appointments can fairly quickly be approved by Vice President [Kamala] Harris breaking any ties, but it will be interesting to see if the Democrats care if they have no or only a handful of votes from Republicans.”

In Vail’s view, if the Democratic majority wishes to compromise in the hope of getting bills passed outside of the reconciliation process, then they might have to withdraw the most progressive nominees.

“Full information is not available on what executive orders will be changed or started, but some could have an effect on markets, especially any restrictions on fracking or other increases in regulation, especially in the health care and drug sectors,” Vail adds. “Note, however, that district judges may halt some of these orders in the same way they did with [former President Donald] Trump’s orders. The aggressiveness of the orders will indicate how much [President Joe] Biden wishes to compromise with Republicans in the Senate on the first stimulus bill.”

Annette Guarisco Fildes, president and CEO of the ERISA Industry Committee (ERIC), says her organization will work with Biden, Harris and the 117th Congress to protect and enhance employee benefits during the coming term.

“Our large employer member companies are ready to do their part to help vaccinate their workforces and reopen the economy,” Guarisco Fildes says. “ERIC believes the practical measures we have shared with the president will have an immediate, positive impact on working Americans across the nation by advancing access to vaccinations, lowering health care costs and enhancing financial wellness and retirement security.”

ERIC is calling on Congress and the administration to provide relief for single-employer pension plans and the multiemployer pension plan system; to strengthen retiree health care by allowing employers to use excess pension funds for retiree health and retiree life insurance benefits; and to temporarily ease testing requirements for employers that reinstate 401(k) matching contributions for the 2020 plan year. 

“ERIC will work diligently to ensure that large employers can provide robust, affordable, high-value employee benefits to their workforce,” Guarisco Fildes says. “There has never been a more important time to ensure that workers and their families are safe and healthy and have access to high quality, affordable health care and a financially secure retirement.”