Piper Sandler says investors should take Trump seriously on trade

Investing.com -- Piper Sandler, in a note dated Tuesday, has reviewed its election portfolios in light of the possibility of Kamala Harris being at the top of the Democratic ticket, concluding that there is no strong argument to change them. 

The brokerage flags that President Biden’s agenda represents the consensus of the progressive wing of the Democratic Party and is not expected to differ significantly under Harris. The Senate remains the primary constraint for both Biden and Harris.

Trump’s portfolio: Trade and macro risks

Piper Sandler underscores the importance of taking Trump seriously on trade. Trade-related ideas account for about one-third of the Trump portfolio, along with macro themes around rates, the dollar, and gold. 

These elements reflect the unusual macro risks associated with Trump, who has fewer policy tools to achieve his desired outcomes in these areas. The rest of the Trump portfolio includes long positions in energy and defense, with potential policy shifts on health care and immigration creating both winners and losers.

Biden vs. Harris: Similar agendas, same constraints

Biden's Build Back Better plan encompassed every major progressive priority, with successes in infrastructure, green energy, and drug price control elements. However, the ambitious social spending agenda and significant tax hikes were left undone. Harris promises to prioritize the "care economy," mirroring Biden's agenda, analysts said.

Harris, having served a short stint in the Senate, has not developed a deep commitment to any particular cause or issue, except for her vocal stance on abortion following the overturning of Roe v. Wade. Therefore, the analysts do not expect any departure from the Biden-Harris agenda under her presidency.

The note stresses that Biden's ambitious agenda faced resistance from Senate Democrats like Joe Manchin and Kyrsten Sinema. Harris, being more progressive than Biden, will likely face similar constraints. 

Even in the best-case scenario for Democrats, a 50-50 Senate without Manchin or Sinema still poses challenges, with more moderate Democrats like Jon Tester or Mark Warner becoming the pivotal votes.

Harris' likelihood of executive actions and court reversals

Piper Sandler notes that Harris has expressed a willingness to issue executive actions exceeding her legal authority, potentially resulting in more frequent court reversals compared to Biden. Nevertheless, the investment implications remain unchanged, with the major difference being Harris' potentially greater odds of winning the election.

Harris’ Portfolio: Continuation of Biden’s regulatory agenda

The Harris portfolio, similar to the Biden portfolio, consists mainly of shorts due to the risks posed by a Democratic agenda to various sectors, such as internal combustion engine car companies, financial firms, drug makers, and companies threatened by the labor agenda. 

Piper Sandler flags that Harris would continue Biden’s regulatory agenda, which could significantly alter the automobile industry and target a wide range of financial firms.

Green energy themes account for about one-third of the Harris portfolio, with solar and EV stocks positioned as longs. The portfolios are designed to perform better depending on the election outcome, with the Harris portfolio thriving under a Democratic win and the Trump portfolio under a Republican win.