"Invisible hand" no longer effective? Bank of America: Trump's economic policy shifting towards "visible fist"

Michael Hartnett, a strategist at Bank of America, pointed out that the Trump administration is increasingly using government intervention to manage the economy, describing this shift as moving from the "invisible hand" to the "visible fist." Hartnett stated that while it has not been officially announced, the government is taking subtle measures to control prices in key sectors and increase supply, possibly to prevent a second wave of unpopular inflation before the midterm elections in 2025. This strategy has been implemented in various industries. In the energy sector, the government has implemented deregulation policies and promoted the peace process in Ukraine, but energy stocks have fallen by 3% since the election. In the healthcare sector, drug prices have been lowered to "most-favored nation" levels through executive orders, leading to an 8% decline in the industry since the election. In the housing sector, a "national housing emergency" was declared to increase affordability through increased supply, leading to a 2% decrease in homebuilder stocks (XHB) since the election. Hartnett mentioned that the market is responding to these political measures by shorting sectors that "restrain inflation" and going long on sectors that can "outperform China" and create leverage for favorable trade agreements by 2026. Hartnett identified the big tech giants, semiconductor companies, and aerospace and defense as industries that are benefiting from this dynamic as "national security winners." Utilities were identified as the next most vulnerable industry. This is because Trump has vowed to cut electricity prices in half within 12 months, while the US Energy Secretary has expressed concerns about AI-driven demand leading to price hikes. Hartnett stated that as long as President Trump's approval rating remains above 45%, these choices may continue to benefit. However, he warned that if the approval rating drops below 40%, this approach may "end in a bad outcome."