By Investing.com – Evercore ISI takes a fresh look at the US equity market in the runup to the November presidential election after President Joe Biden passed the torch to Vice President Kamala Harris to lead the Democratic Party.
The now second foiled assassination attempt on Republican candidate Donald Trump ahead of an historically tight Presidential election is a sign that political uncertainty is likely to continue.
From a policy perspective, while Harris’ ascension to the top of the Democratic ticket has tightened the polling and made the Presidential race a toss-up, Evercore ISI is largely sticking with its previous sectoral winner/loser calls for Harris and Trump victories, given that there haven’t been a ton of material changes on the policy front.
While a century of returns shows that a United government handily outperforms Divided, the sharp partisan divides in the Country make 2025 a year where stocks are more likely to outperform in the event that the government is Divided, as is currently the case.
However, if a Trump/Red Sweep was to occur, Evercore ISI points out the sectors that would benefit most from his deregulatory push, namely Financials and Oil & Gas.
If Republicans manage to sweep Congress, Defense stocks would be added to the list of winners, given many key Republican lawmakers would push for increased Defense spending in that scenario.
The Trump losers are the sectors most exposed to his renewed bigger trade wars, including Autos and Agriculture.
At a macro level, Evercore ISI thinks Trump’s executive actions on immigration and tariffs would be a significant drag on U.S. growth in 2025 (potentially 1 percentage point or more), and the effects of these policies could be magnified given the uncertainty around potential new additional tax cuts that may or may not provide a countervailing growth tailwind.
Most recently, President Trump added two tax cut ideas to his list of proposals: exempting overtime pay from taxes and ending the cap on state and local tax (SALT) deductions that was originally imposed as part of his 2017 tax law. Together, these policies would add at least another $2 trillion to the 10-year deficit cost of Trump’s proposals, bringing the total proposals to at least $9 trillion.