A Biden presidency might be good for stocks, according to JPMorgan

Could Biden bode well for stocks?

That’s what analysts at JPMorgan suggest in a new report.

“The consensus view is that a Democrat victory in November will be a negative for equities. However, we see this outcome as neutral to slight positive,” strategists at the firm wrote in a report Monday.

It wasn’t too long ago that investors appeared bullish on the incumbent reclaiming the presidency. As Fortune reported back in February, investors were largely shrugging off the possibility that a Democratic nominee could clinch the presidency. Wells Fargo Investment Institute’s senior global market strategist Sameer Samana told Fortune back in February that the market was “completely discounting” the possibility of a progressive democratic candidate (and president) almost entirely (although he noted that either Biden or Trump winning were the most likely outcomes).

But today, a Democratic victory could actually prove to be a “slightly” good thing for stocks, the Wall Street firm suggests, as Biden’s platform may be more benign and “center” coming into the White House.

Those like Charles Schwab’s chief investment strategist Liz Ann Sonders point out that if the economy is still in a weak state owing to the virus, big campaign trail items like reversing corporate tax cuts may “move down the priority spectrum.”

Plus, even if Biden secures the presidency, “It’s not the case that the minute there’s a changeover in the White House, everything on the campaign platform becomes policy,” she tells Fortune. That’s why Sonders echos the firm: “I do happen to think a Biden presidency isn’t this guaranteed disaster for the stock market.”

Indeed, strategists at JPMorgan write that Biden’s proposed policies including infrastructure spending, an easing up of tariff rhetoric, and higher wages “should be net positive for S&P 500 earnings and largely offset the corporate tax headwind.” Plus, a more “diplomatic” (read: non-Twitter-based) way of approaching policy at home and abroad would “likely” result in lower volatility. That’s something Sonders points out, too: “Particularly in the last year and a half, leaving COVID-19 aside, we saw a lot of volatility kick in when the trade war was launched,” she notes. “Not that Biden is going to end the trade war, but [there may be] less erratic back and forth.”

Softening on tariffs “could be a significant boost for earnings through reduction in friction costs and lower import prices,” the analysts at JPMorgan wrote, while a higher minimum wage could mean a “neutral positive” for S&P 500 companies, since it would “result in higher aggregate demand while margin pressure should be limited.”

Still, the reversal of Trump’s corporate tax cuts are the “largest headwind” to growth, according to JPMorgan’s analysts. They estimate that if a Democratic president did a partial reversal of Trump’s Tax Cut and Jobs Act (TCJA) benefits and sent rates back up to 28%, it could mean a hit of up to $9 hit in S&P 500 earnings per share.

However, hand-wringing about corporate taxes under a Biden Administration may be premature, JPMorgan writes. “Given the current economic weakness, business recovery and job growth are likely to be prioritized over policies that could dampen economic growth,” suggesting that the degree of “corporate tax reversal may ultimately be lower than currently discussed.” In short: “headline risk might be greater than actual policy.”

A couple names JPMorgan sees as being “outperformers” under a Democratic president? ESG stocks like electric vehicle-maker Tesla, pharma giant Johnson & Johnson, and even Boeing, which the firm suggests would be a beneficiary of a de-escalation in U.S.-China tariffs.

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