Election implications - Energy sector

10/20/20 • 7 min

Patricia Bannan is a managing director and Head of Equities for CIBC Private Wealth Management. In this role, she oversees the firm’s proprietary equity strategies.

Lance Marr is a senior investment analyst providing research and analytical support for the CIBC Energy Infrastructure strategy and serves as team lead on the firm’s Clean Energy strategy.

The energy sector arguably has the most at stake with a change in the political landscape. As we weigh the scenarios, the status quo appears likely in the event of a Trump win, with a benign regulatory environment, federal support for new energy infrastructure projects and no deals with Iran or Venezuela to bring more oil production on the market. While broadly positive, countering this are expectations for limited production growth as investors demand capital discipline in this low-price environment and state and local governments resisting advancement of new infrastructure projects.

When we consider the scenario for the energy sector under a Biden victory, the main focus will be on incentivizing clean energy. The most notable proposal is a $2 trillion climate plan that includes spending on infrastructure and incentives that would serve to accelerate the transition to clean energy. In a Democratic sweep, no doubt the odds of this plan coming to fruition increase. Obvious beneficiaries are companies exposed to renewable and clean energy at the expense of traditional energy companies. With that said, we don’t expect an outright assault on traditional energy companies. Instead, increased regulation on many facets of exploration and production are more likely than something more onerous, like a fracking ban. The result would be less restrictive on production, but with higher costs associated with that production. Furthermore, we may see restrictions on new permits in federally controlled areas, which could shift production to private lands.

Other areas of action would be a scrutiny of energy infrastructure projects under a Biden administration. A Biden team would likely also work to ease sanctions with Iran, allowing more oil on the market.

Patricia Bannan is a managing director and Head of Equities for CIBC Private Wealth Management. In this role, she oversees the firm’s proprietary equity strategies.

Lance Marr is a senior investment analyst providing research and analytical support for the CIBC Energy Infrastructure strategy and serves as team lead on the firm’s Clean Energy strategy.

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Election implications - Financials sector

Patricia Bannan is a managing director and Head of Equities for CIBC Private Wealth Management. In this role, she oversees the firm’s proprietary equity strategies.

Brant Houston is a managing director and co-manager of the Disciplined Equity and Income Opportunities Strategies.

In respect to financial stocks, the most significant issues related to the election are regulations, tax rates, interest rates and spending/deficits.

Under a Trump administration, regulations should continue to ease; under a Biden administration, it would be reasonable to expect additional scrutiny. In either case, the moves would likely be moderate.

Tax rates under the current administration are not likely to move dramatically. Banks were a major beneficiary of the Trump tax cuts in 2018, given their domestic focus. Any move to reverse these cuts by a Biden administration would hurt the banks. Also, increases in taxes on long-term capital gains and/or dividend income could impact how and where money is invested. Bringing long-term capital gain taxes to the short-term level may disincentivize long-term investing, raising trading volumes and volatility.

Increased government spending under a Democrat administration on healthcare, infrastructure and climate could be a double-edged sword. On one hand, higher deficits may mean higher interest rates that could make stocks less attractive overall, but help banks’ earnings through higher net interest margin. But it is also important to note that deficits are not exclusively a Democrat issue, as we have seen the deficit balloon under the current administration. Any initiative to provide affordable care to the masses could have an economic benefit if it leads to a stronger financial position for individuals. If consumer credit improves, this would be a net positive for banks. And in terms of infrastructure spending, there could be a significant improvement in the employment situation.

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Legacy of COVID-19: Lessons learned for the next pandemic – Q&A with Kevin Tabb, MD, President and CEO of Beth Israel Lahey Health

COVID-19 has upended just about everything, and we’re still working through it—how we work, shop, socialize, learn, worship, receive healthcare, and care for others. It has laid bare both strengths and weakness in our institutions, processes and systems. The pandemic has altered life for every age group in almost every way. The coronavirus, after all, is not interested in career dreams, childcare situations or travel plans; it is only interested in host cells.

Key innovations that emerged during this pandemic will outlive it. Others are yet to reveal themselves but will surely be part of the legacy of COVID-19. CIBC Private Wealth is committed to bringing to you the perspective and insight of top thinkers in various fields on what the legacy of COVID-19 could be. In previous installments, we presented views on biotech and vaccines, work and careers, and artificial intelligence in healthcare during the time of COVID-19 (available on our website). In this installment, we talk with Kevin Tabb, MD, the president and CEO of Beth Israel Lahey Health, a healthcare system across Eastern Massachusetts comprised of 13 hospitals, including four academic and teaching hospitals affiliated with Harvard Medical School and Tufts University School of Medicine, and more than 4,000 physicians and 35,000 employees.