Count Democratic National Committee Chair and former Labor Secretary Tom Perez as one who thinks a president Joe Biden would be great for the stock market.
Perez thinks Biden’s plans for robust infrastructure investments would power the economy out the COVID-19 induced recession, and in turn send the stock market higher. “Joe Biden understands what you have to do to get people back to work. Donald Trump had an opportunity to invest in an infrastructure plan. He didn’t do it. Joe Biden has a very robust infrastructure plan. It’s going to put people back to work in good union, middle-class jobs,” Perez, who was the U.S. Labor Secretary in the Obama-Biden administration, told Yahoo Finance’s The First Trade.
With millions of Americans still looking for job and permanent job loss being a major issue (see July jobs report), Perez has a point on the need for a Biden-like infrastructure plan. And how could investors not view the prospects for faster consumer spending and a return to GDP growth as bullish? They can’t.
Biden’s “Build Back Better” economic revival plan is in line with many traditional Democratic efforts around expanded social safety nets and infrastructure investments. The plan devotes about $400 billion to expanding clean vehicle technology, steel production and other building materials. He is also eyeing $300 billion for investments in 5G and artificial intelligence.
Suffice it to say, Perez holds the complete opposite view on what would happen to stocks under a president Biden than Wall Street. Strategists galore continue to voice concern on the prospect of higher corporate taxes in a Biden administration, which would pressure earnings and free cash flow and ultimately equity valuations.
Recall the former vice president wants to reverse half of the President Trump’s signature tax cuts, lifting the statutory rate to 28%. Investment bank Credit Suisse estimates this change in taxes would increase the effective rate by 4% to 5%, and slash $9 off estimated S&P 500 earnings per share. Goldman Sachs has projected that Biden’s tax plan would lead it to reduce its 2021 earnings estimate by 12%.
Perez is quick to shoot down Biden’s proposed tax increases as being bad for stocks and the economy.
“These tax cuts from 2017 were reckless. Many of them need to be reversed. And Joe Biden will have the courage to take that on,” Perez says.