The Biden-Harris administration has the power to usher in broad policy changes that will affect advisors’ and investors’ financial decisions in 2021 and beyond, according to Matthew Bartolini, head of SPDR Americas Research.

For instance, a potential U.S. re-engagement with the world will make investments such as Chinese equities more attractive, Bartolini said in an interview today. At the same time, if the Federal Reserve Board keeps interest rates low, bonds will present a problem in 2021 for advisors and their clients who are looking for income, Bartolini said.

SPDR, a family of funds managed by State Street Global Advisors, expects to see an economic recovery in the United States and internationally as the Covid-19 vaccine is rolled out. “The “recov-olution” [as SPDR has dubbed it] that we expect in 2021 will require balancing the cyclical opportunities stemming from the ongoing recovery, alongside longer-term secular positions aimed at capturing the evolution of the economy,” SPDR ETF said in as report, "The Way Forward."

“With the Biden-Harris administration likely to usher in a more global agenda with respect to trade and diplomacy, investors might be well-served to consider the upside potential in Chinese equities, which come with constructive relative valuations. The region’s forward price-to-earnings, price-to-sales, and price-to-book ratios are trading at a discount that is either at or below the historical median relative discount to U.S. stocks, and indicate there will be growth and upside exposure at a reasonable price,” SPDR ETF said in a reop.

“Investors’ sentiment towards China already has started to shift,” Bartolini said. “Chinese equities have begun to do well and the region’s trajectory is better positioned than the United States” because China and the rest of Asia, including South Korea, handled the virus better than the United States. Chinese and other Asian economies also are in a favorable position because “geo-politics, trade and diplomacy will be more predictable under Biden. There also is more collaboration among the Asian nations, which helps the economies.

“Investors also should consider overweighting mortgage-backed securities, a sector that has provided higher income than treasuries while offering more balance from a risk perspective. Adding high yield bonds, senior loans and emerging market local debt to portfolios can help provide both income and diversification,” he said.

Domestically, several industries, such as video conferencing, document storage, contact tracing technology, contactless delivery systems for distributors and cybersecurity, will benefit from the economic evolution. “Bank stocks may be the ideal cyclical change candidate for 2021,” he added. “The Biden-Harris administration also may give tax credits for producing and buying electric vehicles,” which will boost those stocks.

Although the energy sector traditionally does well in a recovery, the next year may be different. “Energy is a global entity and volatility can be created by the OPEC and OPEC Plus countries,” which makes the sector a poor bet, Bartolini said. “But clean energy will provide investment opportunities. SPDR is taking a globally coordinated approach to clean energy. With new federal policies, there will be pressure on companies to meet new goals and that will turbo charge the sector,” he added.

Fixed income is going to be a problem going forward in the low-rate environment. “You cannot buy traditional bond exposure and get income, but, as you try to move into higher producing areas, you are going to be taking on risks that are not usually associated with bonds,” Bartolini said. “Preferred securities can provide one alternative for high yield bonds. Investors need to balance all sources of revenue and diversify while seeking income.”