Evercore’s Key Predictions for a Trump/Red Sweep

Evercore ISI has recently examined the US equity market in anticipation of the upcoming presidential election in November, following President Joe Biden’s decision to pass leadership of the Democratic Party to Vice President Kamala Harris.

The recent thwarted assassination attempt on Republican candidate Donald Trump underscores the ongoing political uncertainty as the presidential race becomes increasingly competitive.

From a policy standpoint, although Harris’s rise to the top of the Democratic ticket has tightened polling results, Evercore ISI maintains its previous predictions regarding sectoral winners and losers for potential Harris and Trump victories. They observe that there haven’t been significant changes in policy since Harris took the lead.

Historically, a unified government tends to yield stronger stock market performance compared to a divided government. However, given the current sharp partisan divides in the country, Evercore ISI suggests that stocks may perform better if the government remains divided.

Should a Trump-led Republican sweep occur, the report highlights sectors likely to benefit from his deregulatory initiatives, particularly Financials and Oil & Gas. Additionally, if the Republicans gain control of Congress, Defense stocks could also see positive movement, as many key Republican figures are expected to advocate for increased defense spending.

Conversely, sectors that could suffer under Trump’s renewed emphasis on trade wars are those most vulnerable, such as Autos and Agriculture.

On a broader scale, Evercore ISI anticipates that Trump’s executive decisions regarding immigration and tariffs could significantly hinder US growth in 2025, potentially reducing growth by one percentage point or more. The impact of these policies could be exacerbated by uncertainties surrounding possible new tax cuts, which may offer some offsetting economic support.

Recently, Trump has introduced two additional tax cut proposals: exempting overtime pay from taxation and removing the cap on state and local tax (SALT) deductions established by his tax law in 2017. Implementing these measures could add at least $2 trillion to the projected ten-year deficit from his proposals, raising the total estimate to a minimum of $9 trillion.