Investing.com – Evercore ISI is taking a fresh look at the US stock market ahead of 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 a historically close presidential election, is a sign that political uncertainty is likely to continue.
From a policy perspective, Evercore ISI is largely sticking to its previous sectoral winner/loser calls for Harris and Trump wins, while Harris’ climb to the top of the Democratic party has tightened the polls and turned the presidential race into a flop. that there have not been many material changes on the policy front.
While a century of returns shows that a United Government handily outperforms Divided, the country’s sharp party political divisions make 2025 a year in which stocks are likely to outperform if the government is Divided, as is currently the case.
However, if a Trump/Red Sweep were to occur, Evercore ISI points to the sectors that would benefit most from his deregulation, namely the financial sector and the oil and gas sector.
If Republicans manage to capture Congress, defense stocks would be added to the list of winners, as many key Republican lawmakers would push for higher defense spending in that scenario.
Trump’s losers are the sectors most exposed to his renewed bigger trade wars, including the auto and agricultural sectors.
At a macro level, Evercore ISI believes that Trump’s executive actions on immigration and tariffs will be a significant drag on US growth in 2025 (potentially 1 percentage point or more), and that the effects of these policies could be seen to be even greater the uncertainty surrounding possible new additional measures. tax cuts that may or may not provide a compensating growth tailwind.
Recently, President Trump added two tax cut ideas to his list of proposals: exempting overtime from taxes and ending the cap on the state and local tax deduction (SALT), which was originally imposed as part of his 2017 tax law. Together, these policies would add at least another $2 trillion to the deficit costs of Trump’s proposals over ten years, bringing the total of the proposals to at least $9 trillion.
