Is your investment account ready for sweeping changes in Washington?
Now that the elections are over, investors are looking forward to the new Biden administration and a Congress that’s largely controlled by the Democrats.
Whether you’re happy about this new shift or worried about what new policies will look like, one thing is certain…
Change is in the air with the blue wave sweeping Washington!
And whenever changes happen in Washington, the economy or the markets, there’s risk and opportunity.
As we learn more about the Biden agenda, we’ll update our themes here at Rich Retirement Letter.
Our goal is to help you first protect your wealth from changes in our economy and then to help you grow your wealth by tapping into areas that will benefit most from the new administration’s policies.
Today, I wanted to start by outlining some of the big areas at risk. And we’ll look at some of the biggest areas of opportunity for the year ahead.
Related: 3 Hot Stocks to Kick Off 2021
Blue Wave Sweeping Washington Means the Return of Regulation
One of the hallmarks of the Trump presidency was a reduction in business regulations.
This had the positive effect of unlocking productivity. Companies could spend more time growing their businesses and less time on compliance measures.
Of course, if regulations are relaxed too much, it can allow some businesses to be irresponsible and harm their customers, their employees and even the economy!
Biden’s administration is sure to be tougher on corporate regulations than Trump’s. And that creates some specific risks for investors.
For starters, the biggest social media stocks are already facing the prospect of heavier regulation.
Even before Biden has taken office, several lawsuits were filed against big tech companies like Alphabet, Facebook and Twitter for alleged infractions.
Given that these stocks have already surged higher in the last year, there’s now a risk that investors will take profits off the table and sit this season out while we wait to see how new regulations are enacted.
Since these large social media stocks make up such a big portion of the overall market right now, there’s a risk that selling in these stocks will naturally drive the big stock indexes lower.
So even if you’ve invested in a fund that tracks the Nasdaq 100 or the S&P 500 index, this trend could put a dent in your retirement wealth.
I’m also concerned about how new regulations could add more pressure to the oil and gas industry.
If the Biden administration reinstates bans on fracking, drilling on Federal lands or other fossil fuel regulations, it could pose significant challenges to the U.S. oil and gas industry.
So even though energy stocks have been under pressure recently and there are signs that oil prices may be rising, I would be cautious with traditional energy positions for now.
There are simply more reliable places to make money in the markets.
On the positive side, there are quite a few areas of opportunity that are emerging as the new administration prepares to take office.
Alternative Energy Set for Rapid Growth
It’s no secret that Biden and the Democrats are big fans of alternative renewable energy.
And thanks to huge advances in technology over the past decade, power sources like wind, thermal and especially solar are becoming much more viable.
In the solar space, there are quite a few small and mid-sized companies that will benefit from direct subsidies as well as curbs on allowable emissions from more traditional energy sources.
This should benefit companies like First Solar Inc. (FSLR), SunPower Corp. (SPWR) and an assortment of smaller companies that each have unique intellectual property advantages.
I expect to see more buyout plays in the solar space as this becomes a more important theme.
Higher stock prices for the biggest solar players will give these companies buyout currency because they can use their shares to buy smaller companies.
And there will be synergistic advantages for these big companies to buy smaller rivals, adopt the new technology and then spread that technology to existing customer bases.
So watch for plenty of buyout deals and a bullish trend for solar energy stocks in the year ahead!
Infrastructure Package at the Front of the Queue
If there’s one thing that both Republicans and Democrats can agree on, it’s allocating government money for infrastructure projects.
Not only will these projects help to improve our roads, bridges, and public utilities, but they’ll also help usher in new high-tech opportunities like municipal wifi, 5G connectivity and more.
It may sound boring to invest in “old school” plays like Vulcan Materials Co. (VMC) or Caterpillar Inc. (CAT), but these companies should experience significant growth this year.
Stocks associated with infrastructure spending have already been gaining momentum.
Remember, the best investors place their bets before a catalyst takes place. That way, they can ride the trend higher as buying pressure continues to drive the affected stocks higher.
By investing in infrastructure plays now before Biden even takes office, you’ll be doing the same thing — putting your capital in the right place at the right time to profit once new political measures are announced.
Depending on your political persuasion, you may be disturbed by the direction our government is taking. Or you may be relieved.
But as investors, there’s no place to let our emotions or political interests influence our investment decisions.
Instead, let’s keep an objective view on what’s actually happening in our country and put our capital in the best places to protect and grow our wealth.