I recently bet a friend who works in the federal government a bottle of Glenfiddich single malt Scotch whisky that he was wrong to predict that President-elect Joe Biden would appoint progressive U.S. Sen. Elizabeth Warren (D-MA) to head the U.S. Treasury Department. I explained that Biden has served for decades as a moderate in Washington and as such, he would choose a seasoned veteran of the old guard.

Well, it appears that I’ll soon be enjoying some expensive Scotch…gratis.

The news broke Monday that Biden plans to nominate former Federal Reserve Chair Janet Yellen as Secretary of the Treasury. Wall Street was thrilled with the news.

Yellen is deeply rooted within the Wall Street-Washington nexus, with a reputation for level-headed leadership. Yellen’s bipartisan support runs deep. She can keep the Big Money Boys in lower Manhattan happy, while at the same time pacify grassroots activists such as Warren. Biden has made similar choices for other key positions.

Anyone who calls Joe Biden a “socialist” needs to buy a dictionary and look up the word. Biden’s nominees so far represent establishment insiders who are friendly to the business and financial communities. Yes, that’s disappointing news for ideologues on the left and right extremes of the political spectrum. But it’s great news for investors who simply want to build wealth.

It may seem counter-intuitive, but at the end of the day, Wall Street is politically pragmatic. When it comes to your portfolio, you should be, too.

Passing the 30,000 milestone…

Stocks Tuesday soared on the news about Yellen and the growing realization that election uncertainty is finally over. The Dow Jones Industrial Average jumped 454.97 points (+1.54%) to close at 30,046.24, breaking the 30k barrier for the first time. The S&P 500 rose 57.82 points (+1.62%), and the tech-laden NASDAQ climbed 156.15 points (+1.31%). In pre-market futures trading Wednesday, U.S. stocks were poised to open mixed, as investors awaited further news about the presidential transition.

There’s another reason investors are heartened by the choice of Yellen. She has shown a tendency to pay attention to the labor market and consumer spending and isn’t averse to using the tools of the federal government to stimulate economic demand.

Yellen has been an outspoken supporter during the pandemic of government assistance for struggling consumers and businesses. Under her Federal Reserve successor Jerome Powell, the U.S. central bank has poured an unprecedented amount of liquidity into the markets, which in turn has fueled the pandemic-era rebound in stocks.

Recent data show that stimulus would come in handy. When the coronavirus outbreak hit America in March, compelling widespread quarantines and business lockdowns, consumer spending plunged. In April, spending levels fell more than 18% compared to January.

By September, personal consumption expenditures had started to recover and were hovering within 2% of pre-pandemic levels. But dig deeper and you’ll see more to the story. While spending on goods quickly recovered from the initial shock, returning to growth as early as June, consumer spending on services is still more than 6% below pre-pandemic levels (see chart).

The COVID-19 pandemic dramatically curtailed the ability of consumers to spend money on services, such as restaurants, hotels, sporting events, theme parks, and other leisure activities. In response, people shifted their spending to physical goods.

It’s encouraging that overall spending levels have recovered quickly, particularly in light of stubbornly high unemployment. However, the lagging recovery of consumer spending on services is worrisome.

Watch This Video: The Bumpy Road to Recovery

Keep in mind, the U.S. is a service-oriented economy. Personal consumption expenditures on services last year accounted for 47% of the country’s gross domestic product, by far the biggest contributor to economic output. The consensus of experts is that the U.S. economy needs more fiscal stimulus. Jerome Powell has said as much himself.

Yellen’s inclination is to be Keynesian (i.e., a supporter of stimulus), but with restraint. The Federal Reserve operates under a mandate from Congress to “promote effectively the goals of maximum employment, stable prices, and moderate long term interest rates.” It’s often referred to as the Fed’s “dual mandate.”

During her tenure as Fed chair from 2014-2018, Yellen successfully balanced that dual mandate and presided over an improving labor market and historically low interest rates. The Senate is likely to confirm her appointment.

The Federal Reserve is an independent body that’s supposed to be free from political influence. That’s not true of the Treasury Department. Yellen can be expected to bring her negotiating skills to bear with Congress, as the fledgling Biden administration seeks to push additional stimulus through a skeptical Senate.

Will we get a stock market rally in early 2021, fueled by massive fiscal stimulus? I’m willing to bet another bottle of Scotch on it. Now’s the time to rotate into cyclical, economically sensitive sectors, such as energy and infrastructure-related construction stocks. These assets also have the virtue of trading at bargain levels, after getting clobbered during the early stages of the pandemic.

Commodities are set to soar…

The trends that I’ve just described indicate a likely increase in commodities prices next year. Commodities prices have been rallying in recent days and they have much further to run. When the global economic engine starts humming again, demand for raw materials will outstrip supply.

A return to robust economic growth would be favorable for one commodity in particular: copper. The price of copper is poised to soar in 2021 and beyond, which is great news for copper producers.

A wide range of industries and products can’t function without copper. For our favorite investment play on this crucial commodity, click here now.

John Persinos is the editorial director of Investing Daily. You can reach John at: mailbag@investingdaily.com. To subscribe to his video channel, follow this link.