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 Harris/Blue Sweep was to occur, Evercore ISI sees the likely winners as renewables/EVs, with a Harris Administration continuing implementation of the IRA and other clean energy policies, and ACA/Medicaid-leveraged health insurers, given the Harris Administration will continue efforts to boost enrollment in those programs.
At the same time, potential Harris losers include sectors where the Biden Administration’s tougher regulatory approach is set to continue, including Financials, gas/coal-leveraged utilities, prescription drugs, and Medicare Advantage-leveraged insurers.
That said, we note that Harris would largely represent a continuation of the status quo, and that the federal courts are increasingly scrutinizing executive branch regulatory actions across a range of areas, so it’s not clear how big of a net new impact Harris would have via regulation.
Since Harris replaced Biden atop the Democratic ticket, two of her policy announcements have gotten some attention, Evercore ISI said, but it’s not clear either will matter much in the end.
First, Harris called for Congress to enact a federal ban on “price gouging” in the grocery sector, with little detail about what exactly this would entail.
Second, to pay for her housing and “Care/Opportunity Economy” proposals, Harris has said she continues to support most of the tax increases that Biden proposed in his annual budgets, including higher taxes on corporations and top-earning households – though she wouldn’t go quite as far (to 28%) as Biden proposed (39.6%) on capital gains tax increases.
“Enacting Harris’ proposals in these areas requires legislation and would only likely be possible in a Democratic Sweep scenario,” Evercore ISI said, which it sees currently as just a 1-in-10 chance, given the composition of 2024 Senate races is extremely favorable to Republicans.
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