The Tax Cut and Jobs Act proposed by House Republicans last week could be a "significant source of upside" for U.S. equities, according to one of JPMorgan's top analysts.
The corporate portion of the plan will prove "meaningful" and could boost S&P 500 earnings by as much as $12 per share, according to Dubravko Lakos-Bujas, JPMorgan's U.S. head of Equity Strategy.
"Given the current plan is more aggressive than the original House Blueprint, we now expect a larger upside for the market," wrote Lakos-Bujas on Wednesday. "This catalyst could trigger significant rotations with elevated dispersion across style, sector, and size, which could represent an opportunity for active managers."
Even though cost-effective passive management has grown popular in recent years, a marked shift in sector leaders could be just the nudge investors need to give active management a second look. As major tax cuts tend to benefit domestic companies with higher effective rates, Wall Street traders may want to keep an eye on two sectors in particular.