President Joe Biden has dropped out from the 2024 presidential race, endorsing Vice President Kamala Harris as the Democratic nominee.
According to Wells Fargo (NYSE:WFC) analysts, the move could lead to a modest reversal of the “Trump Trade” in services, with Medicaid, Exchanges, and Hospitals benefiting, while Medicare Advantage may underperform.
"Whether that momentum builds would likely depend on how polling develops in the coming weeks, both for the presidential race and key congressional races,” analysts said in a note.
“Key questions include whether Harris is challenged by other Democrats, an eventual VP candidate, and whether differences in platform emerge."
The Trump trade involves investing in assets anticipated to gain if the former president secures another term in the White House.
Enhanced exchange subsidies, currently set to expire after 2025, could be the most direct swing factor, analysts noted. A Democratic administration would likely aim to extend these subsidies, while their future under Trump remains uncertain.
Meanwhile, risks to Medicaid Managed Care Organizations (MCOs) would likely increase under the Trump administration. There would be a greater focus on eligibility and redeterminations, potentially negatively impacting the Medicaid risk pool, as was seen in 2018 and 2019 during Trump's previous term.
On the other hand, Medicare Advantage under Trump "could seemingly benefit" from less regulatory scrutiny and efforts to drive risk adjustment reform and payment parity compared to the Biden administration, analysts continued.
Overall, Wells Fargo believes the path regarding the Trump trade will likely become data-dependent following Biden’s withdrawal.
Tracking by RealClear Polling shows that Trump leads Biden by an average of 3.0% in national polls conducted since the June debate. However, the former president’s lead against Harris is smaller, at 1.9% on average.
After reviewing extensive media coverage, Wells Fargo analysts sense that many Democrats see an opportunity for Harris to more effectively challenge Trump's perceived weaknesses than Biden could. They suspect Harris will continue to run primarily on the existing policy platform.