Evercore ISI is taking a fresh look at the US stock market ahead of November’s presidential election after President Joe Biden handed over the baton to Vice President Kamala Harris to lead the Democratic Party.
The second failed assassination attempt against Republican nominee Donald Trump ahead of the historically lopsided presidential election is a sign that political uncertainty is likely to continue.
Politically, while Harris’ rise to the top of the Democratic ballot has narrowed the polls and made the presidential race lopsided, Evercore ISI largely sticks to its previous industry predictions of Harris and Trump wins, given that no there have been many substantial changes on the policy front.
While a century of returns shows that a United government easily outperforms a Divided one, the country’s sharp partisan divisions make 2025 a year where stocks are more likely to outperform if the government is Divided, as it currently is.
However, if a Trump/Red sweep were to happen, Evercore ISI points to the industries that would benefit most from his deregulatory push, namely financials and oil and gas.
If Republicans manage to sweep Congress, defense stocks will be added to the list of winners, as many key Republican lawmakers will push for increased defense spending in that scenario.
Trump’s losers are the industries most exposed to his renewed larger trade wars, including autos and agriculture.
At the macro level, Evercore ISI believes that Trump’s executive actions on immigration and tariffs will be a significant drag on US growth in 2025 (possibly 1 percentage point or more), and the effects of these policies could be magnified given the uncertainty surrounding potential new additional tax cuts that may or may not provide a countervailing growth headwind.
Recently, President Trump added two tax cut ideas to his list of proposals: exempting overtime pay from taxes and ending the cap on deductions for state and local taxes (SALT) that had originally been imposed under the 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 proposal total to at least $9 trillion.
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Reference;
Nurse, P. (2024) Evercore’s top ideas for a Trump/Red Sweep By Investing.com, Investing.com. Investing.com. Available at: https://www.investing.com/news/stock-market-news/evercores-top-ideas-for-a-trumpred-sweep-3643727 (Accessed: 5 October 2024).
