Joe Biden is now the 46th President of the United States, and the leader-in-chief in fighting against the Covid-19 pandemic. Biden being President could affect many FTSE 100 stocks.
In addition to trying to get more shots from Pfizer vials, Biden has an ambitious $1.9 trillion stimulus package that he wants Congress to pass (which won’t be easy). Among the stimulus plan’s proposals is a $1,400 check to many individuals, as well as fiscal help for local and state governments.
If Biden succeeds in getting Congress to go along with the plan, here are three FTSE 100 stocks that I think could benefit.
FTSE 100 stock HSBC
If Biden’s stimulus passes, the US economy could potentially reach full employment faster. If the US economy reaches full employment faster, US interest rates could also potentially normalise faster.
Given that Hong Kong has a free market economy and the region pegs its currency to the US dollar, Hong Kong interest rates often follow the US’s lead. A faster normalisation of US interest rates could mean a faster normalisation of Hong Kong interest rates.
Seeing as how FTSE 100 stock HSBC (LSE:HSBA) derives a lot of profits from Hong Kong, I think the bank could benefit if the Biden stimulus is passed. Banks often find it easier to make more profits in a higher interest rate environment rather than a low interest rate environment.
Because I think the stock could go higher this year due to economic normalization and the potential stimulus, I’d buy shares in HSBC. Like other financial banks, however, I reckon HSBC has downside if its results don’t meet expectations or if sentiment worsens.
FTSE 100 stock Standard Chartered (LSE: STAN) could also potentially benefit if interest rates rise in Hong Kong. Like HSBC, Standard Chartered makes a considerable amount of profits from the city as well.
If Standard Chartered made more profits, the bank could potentially return more capital to shareholders. Given Standard Chartered’s low price to book value of 0.44, I reckon a meaningful capital return policy would help the stock. Because it has a lot of potential given its low valuation and the recovering emerging market economies, I’d buy Standard Chartered shares.
If the sentiment worsens or management doesn’t execute as well as expected on the other hand, it’s my view the stock has downside.
Pershing Square Holdings
I think Pershing Square Holdings could potentially benefit if the Biden stimulus is passed.
With a $1,400 stimulus check, for example, many people could buy more Chipotle, a company whose stock Ackman’s fund owns. Indeed, many of Ackman’s holdings are consumer companies or economically sensitive stocks that could benefit if the US economy does better.
Ackman has done really well of late. If his hedge fund’s substantial outperformance continues, Pershing Square Holdings could potentially outperform too. With that said, if Ackman’s hedge fund underperforms, the trust could underperform as well.
Due to the fees, I’d just follow Pershing Square Holdings but it could certainly be intriguing given the right situation.
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Jay Yao has no position in any of the shares mentioned. The Motley Fool UK has recommended HSBC Holdings and Standard Chartered. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.