Raymond James says Democratic sweep odds are rising. Here's how to play it

Published Mon, Oct 19 20209:01 AM EDTUpdated Mon, Oct 19 20209:48 AM EDT

Jesse Pound @/in/jesse-pound @jesserpound

(This story is for CNBC Pro subscribers only). The odds of a Democratic sweep in two weeks are rising, and there are ways for investors to take advantage of the shift, Raymond James analysts said in two notes Monday. The investment firm set the odds for a Democratic sweep at 55%, up from 50%, and a 65% chance overall for a win by Joe Biden. The consistently high polling lead for Biden has helped put former Republican strongholds into toss-ups, according to Raymond James' analysis. "At the Presidential level, we have added IA and OH to the list of toss-up states. At the Senate level, we have added 4 Republican-held seats to our list of toss-up seats, with 11 of the 13 most competitive seats currently held by Republicans and 2 by Democrats. Strong support from women voters (potentially by historic margins) and seniors are driving the polling leads for Biden and Democrats," the firm said. It also cited high Covid case counts in Iowa and Wisconsin as a potential risk for Trump. One of the main changes based on the outcome of the election is related to timing and size of economic stimulus. "Under both a Democratic Sweep and a Status Quo election, we are likely to get material fiscal stimulus, though the timing and size may differ obviously, with a Democratic Sweep likely yielding more stimulus in early 2021, while a Status Quo election likely yields less stimulus, but sooner," the firm said. If the projection proves correct and Biden takes the White House with a Democratic Senate, the environment should be positive for small- and mid-cap stocks, as well as sectors like industrials, materials, and consumer discretionary, according to Raymond James. Some of the stocks that the firm said are well-positioned for a Democratic sweep include building products company Masco and Eagle Materials , as well as consumer-focused names like Target and Under Armour . Raymond James has a market outperform rating on Masco, which has a market cap of $15 billion. Shares of the Michigan-based company, which is the parent company of the Behr paint brand, have outperformed the broader market in 2020 with a gain of more than 19%. Masco is scheduled to report its third-quarter results on Oct. 23. The investment firm has strong buy ratings on Target and Under Armour, two stocks that have gone in opposite directions in 2020. Target shares have jumped nearly 29%, while the apparel stock has shed nearly 40%, bringing its market cap to about $6 billion.

U.S. Democratic presidential candidate Joe Biden delivers remarks at a voter mobilization event at Riverside High School in Durham, North Carolina, U.S., October 18, 2020.

Tom Brenner | Reuters

(This story is for CNBC Pro subscribers only).

The odds of a Democratic sweep in two weeks are rising, and there are ways for investors to take advantage of the shift, Raymond James analysts said in two notes Monday.

The investment firm set the odds for a Democratic sweep at 55%, up from 50%, and a 65% chance overall for a win by Joe Biden. The consistently high polling lead for Biden has helped put former Republican strongholds into toss-ups, according to Raymond James' analysis.