On March 31, President Biden announced a $2 trillion infrastructure and economic recovery plan as part of his “Build Back Better” (BBB) plan in a speech in Pittsburgh, the traditional industrial town that is transitioning to healthcare and technology, where his 2019 presidential campaign began. This is an important part of his “Build Back Better” (BBB) administration’s program.
The infrastructure plan is a “once-in-a-generation investment” that will build 500,000 electric vehicle charging stations
Biden said the infrastructure plan includes both jobs and families, also known as the “American Jobs Plan,” and will be “a once-in-a-generation investment. The new crown Epidemic has worsened the economic divide and is becoming more pronounced, so it’s Time to rebuild the economy from the bottom up and help the middle class get out of the way. Plans for American families will be discussed in the coming weeks.
He also said that the American Jobs Plan would improve the U.S. position in chips, biotechnology, energy and remain competitive, that people earning less than $400,000 a year would not be subject to federal tax increases, and that “no one should complain about the U.S. raising corporate taxes to 28 percent “. He also said he plans to build 500,000 electric vehicle charging stations across the United States.
Several electric vehicle stocks and transportation ETFs rose after hours on the news
Stocks reacted quickly to Biden’s speech after hours as the market waited all day for this infrastructure package and the accompanying tax increase plan.
Greenpower Motor in the electric vehicle sector was up nearly 2% in the U.S. after-hours, and Workhorse was up over 7%. Biotechnology stocks were mixed after hours, with HALO up over 0.7%, NVTA up over 0.2%, PACB down over 0.9%, BLUE down nearly 1.2% and ETF XBI down about 0.3%.
S&P Transportation ETF-SPDR (XTN) rose 0.8% after hours, Nasdaq Transportation ETF (FTXR) rose more than 1%; Water ETF-PowerShares (PHO) rose 0.3%, Global Clean Energy ETF-iShares (ICLN) rose more than 1%. Bloomberg said the infrastructure plan contains key areas such as transportation, broadband, water supply and clean energy, with which a number of stocks and ETFs will be affected.
Biden also said Amazon has a tax evasion problem, and with that Amazon should be down about 0.1% after hours.
Infrastructure program a day ahead of the White House has been revealed to the media, mainly by the burden of corporate tax increases
Biden’s speech today was short, and the main proposals of his infrastructure plan were revealed to the media by anonymous White House officials on Tuesday evening.
The plan, which aims to revitalize U.S. transportation infrastructure, water systems, network broadband and manufacturing, among other goals, will fund infrastructure spending over 15 years by raising the statutory tax rate for U.S. domestic companies from 21 percent to 28 percent and by taking measures to prevent profit outflows.
It is reported that the $2.25 trillion infrastructure plan consists of four parts, lasting eight years, is the follow-up to the $1.9 trillion economic bailout bill signed into law this month. Biden believes it will “reinvigorate the American imagination” and “put millions of Americans to work right away.
Some of the details of the infrastructure plan, as revealed in the media earlier, are as follows.
621 billion in transportation infrastructure, including bridges, roads, public transportation, ports, airports and electric vehicle development.
400 billion dollars in direct funding to improve care for the elderly and disabled
Over $300 billion invested in improving drinking water infrastructure, expanding broadband access and upgrading the electric grid.
Over $300 billion invested in building and renovating affordable housing, building and upgrading schools.
Investing $580 billion in U.S. manufacturing, research and development and job training, including $180 billion in non-defense research programs, the largest in the nation’s history, and $50 billion dedicated to domestic semiconductor manufacturing. Biden Administration Focuses on Green Infrastructure, Programs Related to American Families Expected to Be Announced in Weeks
In terms of green infrastructure, Biden has called for massive investments in electric vehicles, renewable energy and the electric grid as part of a broad blueprint to support the U.S. economy and combat climate change.
For example, Biden intends to invest about $174 billion in government funding for an electric vehicle program, including restructuring plants and increasing domestic material supplies, tax incentives for electric vehicle buyers, electric school bus retrofits and building 500,000 electric vehicle charging stations nationwide.
He also plans to use $100 billion to build a more resilient grid, initiate a 10-year extension of tax incentives for wind, solar and other renewable energy projects, and require more electricity to come from low-carbon sources, with the goal of eliminating carbon emissions from the grid by 2035.
Thereafter, the Biden administration’s focus would shift to improving Education, expanding paid leave and health care coverage. The White House revealed that the second part of the economic plan, which could involve huge investments in U.S. health care and child care, is expected to be announced in late April.
As mentioned in the Wall Street Journal, the media first reported the size of the latest infrastructure plan to be as large as $3 trillion, and the Washington Post even put the size at $4 trillion. In order to provide support for such a large amount of spending, the Biden administration’s total tax increase may exceed $3 trillion. The Biden administration also believes tax increases could advance its goal of reducing income inequality, according to sources familiar with the matter.
“The latest news is that tax increases could total more than $3 trillion, with the wealthy and corporations being the biggest targets. Of that, raising corporate income taxes alone could bring in $730 billion in revenue over the next decade, and raising taxes on the capital gains of the wealthy could bring in $370 billion.” Biden’s “sky-high” infrastructure plan makes markets sensitive to Inflation expectations, but risk sentiment lifts
On the eve of the market waiting for the announcement of the infrastructure stimulus plan, the S&P 500 rose nearly 0.9% at midday and hit a record high in the session, FAAMNG led the rally in technology stocks, the Nasdaq rose more than 2% in the session.
Infrastructure favorable new energy vehicles, solar energy, construction and other industry stocks mostly rose, of which, tesla rose more than 5%, the new Chinese car makers rose, listed in March through SPAC, providing charging pile services in California electric vehicle infrastructure company ChargePoint rose nearly 24% at the highest.
The 10-year U.S. bond yield turned down 1 basis point during the day to trade at 1.716%, then returned to 1.74% and turned up during the day, once above 1.77% yesterday and hit a 14-month high.
Previous analysis said that for investors, Biden’s upcoming disclosure of “sky-high” infrastructure plans will make market sentiment, which is quite nervous about inflation, even more nervous.
Two years after the FOMC voting rights of the U.S. Dallas Fed President Kaplan said today that infrastructure spending should boost the potential growth of the U.S. economy, inflation is expected to be moderate in 2022 and 2023, the Fed’s goal is to anchor inflation expectations at 2%.
Analysis: Lack of demand for building a national electric vehicle charging network, green infrastructure not pulling GDP as much as traditional infrastructure
Bank of America has said that the convergence of three major U.S. factors, including infrastructure plans, has led to higher inflation expectations: 1. unprecedented fiscal stimulus (over 25% of GDP), infrastructure plans (scheduled for completion in 2021/2022); 2. under the new inflation targeting framework (FAIT), the Fed is not expected to raise interest rates until 2023; 3. the current U.S. vaccine distribution rate is much higher than other European and American countries, which will push the U.S. economy to recover faster, making U.S. bond yields and the U.S. dollar higher and emerging market countries’ bond yield curves steeper.
CIMB believes that in addition to traditional infrastructure, the Biden administration’s fiscal thinking has changed, with “broad fiscal” being the keynote and a greater focus on green infrastructure related to environmental protection, but the legislative process is facing congressional resistance and local constraints on project advancement. Biden is most likely to split the infrastructure bill into two parts, respectively, to bipartisan consultation bill and budget mediation process, is expected to pull the U.S. GDP growth rate of less than 1 percentage point in 2022, if the tax increase, the positive effect of infrastructure will be a little smaller.
In terms of resistance, in addition to the CDF’s claim that “green infrastructure may have a weaker pull on the economy than traditional infrastructure”, there are also analyses that point out that the construction of a national electric vehicle charging network still faces shortcomings such as insufficient demand, expensive installation costs and difficulties in coordinating operations in many aspects.
U.S. Republican Senate leader Mitch McConnell publicly opposed Biden’s plan to support infrastructure through tax increases. He called infrastructure like a Trojan horse, the essence of which is actually up to trillions of dollars of massive borrowing and a substantial tax increase on all productive sectors of the economy.
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