The S&P 500 will climb 13% in 2021 - and these 3 sectors will see the biggest boost from a Democrat-controlled Congress, a global stock strategist says

The S&P 500 will climb 13% in 2021 - and these 3 sectors will see the biggest boost from a Democrat-controlled Congress, a global stock strategist says
Traders work on the floor at the opening bell of the Dow Industrial Average at the New York Stock Exchange on March 18, 2020 in New York.Bryan R. Smith/AFP/Getty Images
  • Congressional Democrats will "go fast, go big" with a range of policy initiatives that could benefit materials, industrials, and financials, according to a team of Jefferies equity strategists led by Sean Darby.
  • Meanwhile, the S&P 500 could gain 13% to 4,200 by the end of 2021 as President-elect Biden's centrist views will prevent any dramatic legislative changes, Darby said.
  • The global equity strategist estimates that an additional $1 trillion of stimulus will be added to the economy in the next few months as Democrats will push for a large infrastructure bill.
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Congressional Democrats will "go fast, go big" with a range of policy initiatives that could benefit materials, industrials, and financials, according to a team of Jefferies equity strategists led by Sean Darby.

Darby estimates that an additional $1 trillion of stimulus will be added to the economy in the next few months as Democrats will push for a large infrastructure bill as well as spending on renewables. This should benefit copper and the materials sector. The global equity strategist also said that the industrials sector will receive a boost, as it "perfectly bridges the infrastructure and domestic spending themes."

Financial stocks should also fare well in 2021 as fiscal spending could lead to higher inflation and a steeper yield curve, Darby said.
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Meanwhile, Jefferies expects the S&P 500 to reach 4,200 by the end of 2021, a roughly 13% upside from current levels. Darby said that the "further left agenda" that may have resulted in drastic economic changes will be kept at bay because Democrats only hold a slim majority in the Senate. Also, President-elect Biden's centrist views suggest that dramatic changes are unlikely in the next two years.

With this environment, Darby says that 2021 will be positive for the stock market. The strategist expects sales growth for all S&P 500 stock sectors to be positive year over year.

Darby is bullish on industrials, materials, and financials, while he's bearish on real estate and utilities.
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