Piper Sandler recently reviewed its election portfolios in anticipation of Kamala Harris potentially being at the top of the Democratic ticket. The brokerage concluded that there is no strong argument to change the portfolios based on this possibility. This decision was made with the belief that President Biden’s agenda aligns with the progressive wing of the Democratic Party and is not expected to change significantly under a Harris presidency.
Implications for Trade and Macro Themes
Piper Sandler emphasized the importance of taking Trump seriously on trade, as trade-related ideas make up a significant portion of the Trump portfolio. The firm highlighted macro themes surrounding rates, the dollar, and gold as particularly sensitive to Trump’s policies. With his limited policy tools in these areas, Trump’s approach to trade and macroeconomic issues carries unique risks for investors.
Policy Shifts and Sectoral Impacts
The rest of the Trump portfolio includes long positions in energy and defense, anticipating potential shifts in health care and immigration policy. These changes could create winners and losers within these sectors. On the other hand, Biden’s Build Back Better plan addresses key progressive priorities like infrastructure, green energy, and drug price control. Despite progress in these areas, significant tax hikes and parts of the social spending agenda remain unresolved.
Analysts suggest that Harris is likely to continue prioritizing the “care economy” and other key aspects of Biden’s agenda. However, her short tenure in the Senate means that she may not have developed strong commitments to specific causes aside from her vocal support for abortion rights. This lack of deep-seated policy priorities could limit the scope of potential changes under a Harris presidency.
Piper Sandler notes that both Biden and Harris face challenges in the Senate, particularly from more moderate Democrats like Joe Manchin and Kyrsten Sinema. Even in a best-case scenario for Democrats, a 50-50 Senate could still present obstacles, with the potential for more moderate Democrats to hold significant sway over key votes. Harris’s willingness to issue executive actions beyond her legal authority could also lead to more frequent court reversals compared to Biden.
Despite potential differences in approach, Piper Sandler’s investment implications remain largely unchanged between the Biden and Harris portfolios. Both portfolios feature shorts on sectors like internal combustion engine car companies, financial firms, and drug manufacturers, reflecting the risks posed by a Democratic agenda. Harris’s portfolio, like Biden’s, includes green energy themes and stakes in solar and EV stocks. The portfolios are structured to perform based on the election outcome, with the Harris portfolio positioned to thrive under a Democratic win, while the Trump portfolio stands to benefit from a Republican victory.