THE COWEN INSIGHT
The Cowen Washington Research Group analysts have collaborated on this report to explore the various election outcome scenarios and their impact on 2021 policy. Ultimately, the arbiter for policy next year will not just be the Senate majority, but the margin.
Macro Policy – Outcome of Senate Races Unlikely to be Determined for Days
Given surge in mail-in & likelihood of TWO runoffs in GA, Senate majority fate unlikely for days. There are 14 key races and 4 bellwethers (Iowa, North Carolina, Montana and Maine).
The three most likely election scenarios:
- Biden wins with narrow Democrat Senate
- Biden wins with 52+ Democrat Senate (Blue Wave)
- Trump wins with the status quo (GOP Senate & Democrat House)
The elections are key for the budget trajectory over the next 5 years. We see defense spending top-line ranges from flat (2% nominal growth) to down -5% to -8% (real). We think defense metrics hold up for at least the next 2 years. Fears of Democrats enacting sweeping budget cuts are unrealistic.
Financials / Housing / Cannabis Policy
In general, we think banks will fare better under Biden given macro positives while many other financial firms will fare better with Trump given regulatory positives. Trump offers a more favorable regulatory regime & lower corporate taxes though this comes at the expense of macro uncertainty. Biden means a tougher regulatory regime and higher taxes, but we expect a more stable macro environment with fewer trade fights, less use of tariffs and a more independent Fed.
Health Care Policy
Rick Weissenstein & Eric Assaraf
Without Democrat control of the Senate, there’s little Biden can do outside of drug pricing demos, which are a threat (like the IPI Model). With Democrat control of the Senate, Biden likely leads with the expansion of the ACA. However, a public option is unlikely with a narrow Senate majority. Biden’s more aggressive plans like limiting drug launch prices are unlikely.
If the election results in the status quo we will see pressure to act on drug pricing. A second Trump term likely results with only executive orders and demos as avenues for changes in drug pricing.
For major tech platforms, a Trump second term would bring moderately more favorable (though clearly not risk-free) regulatory environment. Biden would likely facilitate a multi- pronged regulatory encroachment via regulation, antitrust lawsuits & legislation.
For semis/semicaps, we would anticipate Trump continuing to take swings at China via export controls. Biden would be more nuanced but directionally similar to Trump. China remains bipartisan.
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