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How will Biden’s Infrastructure Plan Impact the Stock Market?

How Will Biden’s Infrastructure Plan Impact on the Stock Market?

While last year’s US election was fought on numerous fronts, the issue of infrastructure remained an underlying theme throughout.

Certainly, the nation’s infrastructure remains in dire need of repair, with this having recently earned a C-score from the American Society of Civil Engineers. This body claimed that an additional $2.6 trillion investment was required over the course of the next decade, with President Biden responding to this as a cornerstone of his election manifesto.

In this post, we’ll look closely at Joe Biden’s infrastructure plan, while asking how this is likely to impact on the stock market.

What is Joe Biden’s Infrastructure Plan?

Once Biden’s ambitious, $1.9 trillion coronavirus relief package was passed into law, the new President turned his focus on announcing a vast infrastructure project aimed at restoring America’s crumbling foundations. 

This proposal is worth an estimated $2 trillion, while it has been dubbed as the ‘American Jobs Plan’ thanks to its focus on shifting to cleaner energy sources and forging exciting new industries nationwide.

In this respect, it has been designed to build on the recent stimulus spending and provide a long-term path towards the nation’s post-coronavirus recovery, with the project set to be partially funded by corporate tax hikes to the tune of $2 trillion over 15 years.

The biggest element of the proposal is transportation, with an estimated $621 billion set aside to improve roads, bridges and highways nationwide.

A further $400 million has been pledged to bolster caregiving for an increasingly aging and disabled population, with this likely to be distributed across the provision of improved long-term care services under Medicaid and the average wages of home health workers (who currently make just $12 an hour).

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Incredibly, one-in-six home health workers live in poverty, with Biden’s plan looking to tackle this issue directly and effectively.

How will this Impact the Stock Market?

The forex market has seen increased dollar volatility in the wake of the announcement, with this likely to continue ahead of upcoming employment data and jobless claims releases.

In terms of the stock market, there’s likely to be something of a mixed reaction to Biden’s ambitious infrastructure plans.

Certainly, the fact that corporations banking more than $400,000 per annum will have to pay an increased rate of taxation, with this potentially squeezing profit margins and creating negative sentiment in the marketplace.

However, several stock market sectors are expected to grow on the back of Biden’s spending plan, which is noticeably diverse and also likely to be led by technology and innovation.

Certainly, the focus on roads and highways will benefit construction firms, while the desire to optimise safety will see an increased number of roadway sensors installed and potentially benefit market leading equities such as Iteris (ITI).

Biden’s longer-term spending plan will also see the development of a federal electric vehicle charging network that will include 500,000 functional charging stations by the year 2030.

This will undoubtedly benefit brands such as Tesla, which lead the way in terms of electric vehicle development and have already seen exponential share price growth through 2020.

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