Buy this 'Democrat Agenda Outperformers' basket to play a Biden election victory, JPMorgan says

Published Tue, Jul 7 202011:23 AM EDT

(This story is only for CNBC Pro subscribers ) With the 2020 presidential election just four months away, JPMorgan created a "Democrat Agenda Outperformers" basket for investors looking to bet on Joe Biden's victory over President Donald Trump and gains by Democrats in Congress. Agenda items expected of a Biden presidency include a federal minimum wage hike, easing of some tariffs and trade war hostilities, and expanded infrastructure spending. And though policy goals are often refined in the months leading up to the election, JPMorgan Chief U.S. Equity Strategist Dubravko Lakos-Bujas says the campaign has already signaled a sufficient number of priorities to start to positioning. "Given the current economic weakness, business recovery and job growth are likely to be prioritized over policies that could dampen economic growth and perhaps even jeopardize the desired 2022 midterm election outcome. As such, the degree of corporate tax reversal may ultimately be lower than currently discussed," Lakos-Bujas wrote. "Other policy proposals including infrastructure spending, softening tariff rhetoric and higher wages should be net positive for S & P 500 earnings and largely offset the corporate tax headwind," he added. Irrespective of each investor's individual political preferences, Biden's bid for the White House appeared competitive as of the most recent polling data compiled by RealClearPolitics.com . An average generated by the website showed Biden leading Trump by 8.7 percentage points as of Tuesday morning. And despite Wall Street's consensus opinion that Biden's election could result in a headwind for the stock market and a rollback of the Trump-era corporate tax cuts, JPMorgan said it thinks the Democrat's victory could actually be a positive for markets. Lakos-Bujas broke down the stocks he thinks could outperform under Biden by industry group and added commentary for each group. 1. ESG/Green technology/infrastructure Stocks that could outperform: Tesla (TSLA), NextEra Energy (NEE), Nikola (NKLA), Caterpillar (CAT). "Infrastructure spending could accomplish multiple priorities for Biden starting with employment, incentivizing use of alternative energy and green technologies, and modernizing public transportation, power and communication systems." 2. Minimum wage hike beneficiaries Stocks that could outperform: Apple (AAPL), Facebook (FB), Alphabet (GOOGL), Visa (V). "Like most policies, it will create winners and losers with some businesses able to absorb and/or pass on higher labor related costs while most will need to adjust/disrupt existing business models. Distinguishing winners from losers will depend on businesses who will see incremental demand due to rising disposable income, lower labor intensity (revenue/employee), and higher margins." 3. U.S.-China De-Escalation Stocks that could outperform: Procter & Gamble (PG), Thermo Fisher (TMO), Danaher (DHR), Nike (NKE). [Biden] has emphasized reducing trade barriers and would prefer building an international coalition against China as opposed to unilateral tariffs as a means of affecting change. ... If Biden is able to achieve bi-lateral easing of tariffs with increased purchases of goods by China, it could be a significant offset to higher taxes." — CNBC's Michael Bloom contributed reporting.

Caterpillar excavators are displayed for sale at the Whayne Supply Co. dealership in Louisville, Kentucky, Jan. 27, 2020.

Luke Sharrett | Bloomberg | Getty Images

(This story is only for CNBC Pro subscribers)

With the 2020 presidential election just four months away, JPMorgan created a "Democrat Agenda Outperformers" basket for investors looking to bet on Joe Biden's victory over President Donald Trump and gains by Democrats in Congress.

Agenda items expected of a Biden presidency include a federal minimum wage hike, easing of some tariffs and trade war hostilities, and expanded infrastructure spending.

And though policy goals are often refined in the months leading up to the election, JPMorgan Chief U.S. Equity Strategist Dubravko Lakos-Bujas says the campaign has already signaled a sufficient number of priorities to start to positioning.