New York, January 21, 2021 – Mitsubishi UFJ Financial Group (MUFG) today released a presentation to C-suite executives analyzing U.S. President Joseph R. Biden’s priorities in his first 100 days in office and their implications for the capital markets, the global economy and public policy.
“Mr. Biden’s inauguration comes on the heels of a structural shift in Washington brought by two key Senate wins in Georgia for the Democratic Party earlier this month,” says Tom Joyce, head of MUFG’s Capital Markets Strategy group, which authored the presentation and equips executives with insights to anticipate, understand, and respond to market and macroeconomic developments. “We believe this shift will open possibilities for Mr. Biden to pursue his legislative agenda and reach bipartisan agreement on multiple fronts.”
The Capital Markets Strategy group’s key findings span five of the following areas:
- Capital markets: The group foresees continued dollar depreciation, an abundance of global liquidity, a strong technical bid for yield in credit markets, a bearish steepening of the yield curve, continued strength among cyclical industries, a greater post-pandemic equilibrium in oil markets, and an accelerated adoption of environmental, social and governance (ESG) principles that will transform global finance.
- The economy: The group expresses growing concerns over inflation and stagflation, challenges for small businesses (i.e., a “crisis from the bottom”), and the fiscal stimulus needed to confront the negative economic impact of a resurgence in coronavirus infections during the first quarter. The group foresees a more rapid than expected recovery and above-trend growth for the remainder of the year, highlighted by significant outperformance in select geographic regions, industries and businesses.
- Public policy: The group expects the Biden administration to focus in its early months on moderating the so-called “K-shaped” recovery—the divergence between the vigorous recovery witnessed in capital markets and other struggling parts of the economy—by providing more support for the latter. Additionally, it believes the new administration will implement a “light green” overlay (i.e., an environmentally friendly agenda) in its domestic and foreign policies with respect to trade, economics and taxation, infrastructure, the U.S.-China relationship and other fronts.
- Foreign policy: The group points out the preponderance of Washington veterans among Mr. Biden’s announced list of appointees and foresees, under their stewardship, a return to multilateralism and a focus on presenting a unified, consistent, and measured posture toward U.S. allies abroad.
- Governance: In the group’s view, Mr. Biden will have multiple legislative avenues available to him to realize his agenda, including: (i) the passing of bipartisan COVID-19 relief measures in the first quarter requiring 60 Senate votes; (ii) a second-quarter Budget Reconciliation process requiring just 51 Senate votes, should bipartisan efforts fail; and (iii) a late-2021 or early-2022 Budget Reconciliation process for fiscal-year 2022, which begins on October 1 of this year and will focus on larger and more complicated policies, including tax policy, infrastructure spending, environmental protection, healthcare expansion, and other domestic priorities.
Drivers of higher potential volatility in 2021
“We enter 2021 with elevated political, economic and public-health risks,” Mr. Joyce says. “While the tailwinds are formidable--including the advent of a COVID-19 vaccine and aggressive fiscal stimulus—the year ahead will likely be characterized by higher volatility and more frequent market corrections.”
Mr. Joyce adds that other potential drivers of volatility this year include the residual effects of the pandemic, high corporate and sovereign leverage, high security valuations, U.S.-China rivalry and geopolitical tensions, and a dwindling toolkit of monetary and fiscal policy to confront economic challenges.
The full report can be accessed here or using the following link:
MUFG is one of the world’s largest financial institutions by assets, with approximately $3.3 trillion.1
About Mitsubishi UFJ Financial Group, Inc.’s U.S. Operations including MUFG Americas Holdings Corporation
The U.S. operations of Mitsubishi UFJ Financial Group, Inc. (MUFG), one of the world’s leading financial groups, has total assets of $339 billion at September 30, 2020. As part of that total, MUFG Americas Holdings Corporation (MUAH), a financial holding company, bank holding company, and intermediate holding company, has total assets of $164 billion at September 30, 2020. MUAH’s main subsidiaries are MUFG Union Bank, N.A. and MUFG Securities Americas Inc. MUFG Union Bank, N.A. provides a wide range of financial services to consumers, small businesses, middle-market companies, and major corporations. As of September 30, 2020, MUFG Union Bank, N.A. operated 348 branches, consisting primarily of retail banking branches in the West Coast states, along with commercial branches in Texas, Illinois, New York, and Georgia. MUFG Securities Americas Inc. is a registered securities broker-dealer which engages in capital markets origination transactions, domestic and foreign debt and equities securities transactions, private placements, collateralized financings, and securities borrowing and lending transactions. MUAH is owned by MUFG Bank, Ltd. and Mitsubishi UFJ Financial Group, Inc. MUFG Bank, Ltd., a wholly owned subsidiary of Mitsubishi UFJ Financial Group, Inc., has offices in Argentina, Brazil, Chile, Colombia, Peru, Mexico, and Canada. Visit www.unionbank.com or www.mufgamericas.com for more information.
Mitsubishi UFJ Financial Group, Inc. (MUFG) is one of the world’s leading financial groups. Headquartered in Tokyo and with more than 360 years of history, MUFG has a global network with over 2,700 locations in more than 50 countries. The Group has over 180,000 employees and offers services including commercial banking, trust banking, securities, credit cards, consumer finance, asset management, and leasing. The Group aims to “be the world’s most trusted financial group” through close collaboration among our operating companies and flexibly respond to all of the financial needs of our customers, serving society, and fostering shared and sustainable growth for a better world. MUFG’s shares trade on the Tokyo, Nagoya, and New York stock exchanges.
Visit https://www.mufg.jp/english for more information.
1As of September 30, 2020, at the exchange rate of USD=¥105.8