Investing.com – Evercore ISI takes a fresh look at the US stock market in the run-up to the November presidential election after President Joe Biden passed the torch to Vice President Kamala Harris to lead the Democratic Party.
The second failed assassination attempt on Republican candidate Donald Trump ahead of a historically close presidential election is a sign that political uncertainty is likely to persist.
From a political perspective, while Harris’ rise to the top of the Democratic ticket has tightened polling and made the presidential race a toss-up, Evercore ISI is largely sticking with its previous winner/loser sectoral calls for Harris and Trump victories, since there haven’t been many material changes to Politics front.
While a century of returns show the United Government handily outperforming the Divided Government, the country’s sharp partisan divisions make 2025 a year in which stocks are likely to outperform if the government is split, as is currently the case.
However, if a Trump/Red sweep occurs, Evercore ISI points to the sectors that would benefit most from his deregulation drive, namely financials and oil and gas.
If Republicans can sweep Congress, defense stocks will be added to the list of winners, since several key Republican lawmakers would push for increased defense spending in that scenario.
Trump’s losers are the sectors most vulnerable to his larger trade wars, including the auto and agricultural sectors.
At a macro level, Evercore ISI believes Trump’s executive actions on immigration and tariffs will pose a significant drag on U.S. growth in 2025 (perhaps a percentage point or more), and the effects of these policies could be amplified given uncertainty about potential new additions. and tax cuts that may or may not provide headwinds to growth.
Recently, President Trump added two tax cut ideas to his list of proposals: exempting overtime wages from taxes and ending the cap on state and local tax (SALT) deductions that were originally imposed as part of the 2017 tax law. Combined, these policies would add at least Another $2 trillion adds to the ten-year deficit cost of Trump’s proposals, bringing the total proposals to at least $9 trillion.
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