Best Evercore Ideas for a Harris/Blue Sweep by Investing.com

Investing.com – Evercore ISI is taking a fresh look at the U.S. stock market ahead of November’s presidential election after President Joe Biden handed the torch to Vice President Kamala Harris to lead the Democratic Party.

The second failed assassination attempt on Republican nominee Donald Trump ahead of a historically close presidential election is a sign that political uncertainty will continue.

From a political perspective, while Harris’ rise to the top of the Democratic ticket has tightened the polls and made the presidential race a disappointment, Evercore ISI is largely sticking with its previous sectorial winner/loser calls for Harris and Trump victories , given that there haven’t been a lot of material changes on the policy front.

While a century of returns show that a United government easily beats Divided, the country’s stark partisan divisions make 2025 a year in which stocks are more likely to outperform if the government is Divided, as it is now .

However, in the event of a Harris/Blue Sweep, Evercore ISI believes the likely winners are renewables/EVs, with a Harris administration continuing to implement the IRA and other clean energy and health insurance policies leveraged ACA/Medicaid given Harris. The administration will continue efforts to increase enrollment in these 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 utilities, prescription drugs and leveraged Medicare Advantage insurers.

That said, we note that Harris would largely represent a continuation of the status quo, and that federal courts increasingly scrutinize executive branch regulatory actions in a number of areas, so it’s unclear how large would be the net new impact that Harris will have through the regulation.

Since Harris replaced Biden at the top of the Democratic ticket, two of her policy announcements have drawn attention, Evercore ISI said, but it’s not clear that either will matter much in the end.

First, Harris called for Congress to enact a federal ban on “price gouging” in the food industry, with few details on what that would entail.

Second, to pay for his housing and “Care/Opportunity Economy” proposals, Harris said he continues to support most of the tax increases Biden has proposed in his annual budgets, including higher corporate taxes and households with the highest incomes – although they would not go as far (up to 28%) as Biden proposed (39.6%) on raising the capital gains tax.

“Enactment of Harris’ proposals in these areas requires legislation and would likely only be possible in a Democratic sweep scenario,” said Evercore ISI, which it currently sees as only a 1-in-10 chance given that the makeup of the races for the Senate in 2024 is extremely favorable to Republicans.