Evercore Says Bipartisanship Could Drive S&P 500 Toward 9,000

Evercore ISI has raised the possibility of a bipartisan-driven "bull stampede" that could carry the S&P 500 past its 7,750 year-end target and toward 9,000. The call comes from strategists led by Julian Emanuel, who frame today's political setup as a replay of the 1980s.

The parallel is specific. In the 1980s, a Republican president, a Democrat speaker of the House and an inflation-fighting Federal Reserve chairman powered a stock-market rally. Ronald Reagan, Tip O'Neill and Paul Volcker filled those roles then. Now, in the Evercore view, Donald Trump, Hakeem Jeffries and Kevin Warsh could occupy the same positions.

"A historic opportunity for bipartisanship and taming inflation awaits," the Evercore strategists said in a note.

What does the trade look like?

The Evercore team argues that bipartisanship could fuel a fear-of-missing-out rally in stocks. To position for that scenario, they recommend an options strategy: buy calls on the Nasdaq-100 ETF QQQ expiring in March or June that are slightly out of the money.

The specific term they used was "25 delta" — options with roughly a one-in-four chance of finishing in the money. That translates to strikes about 7% to 10% above the current market price.

Where does the market stand now?

The S&P 500 gained 1.6% to 7,688.62 on Wednesday. Stock-market futures were steady ahead of the opening bell on Thursday. The index already sits near Evercore's 7,750 year-end target, which is why the strategists sketch the more ambitious 9,000 scenario if a bipartisan bargain materializes.

The comparison works like this: a president who wants legislative wins, a speaker willing to negotiate, and a Fed chair focused on killing inflation formed the three-part engine of the 1980s rally, and each part has a plausible counterpart today.

What did the politicians actually say?

Trump spoke in a live-streamed video interview with Politico as the midterm results rolled in. He said he wanted to do more than exercise the veto in the last two years of his presidency. Jeffries, the likely next speaker, said he would try to find common ground.

Bipartisan rhetoric aside, cooperation may prove difficult. Democratic leaders, including the incoming chair of the House Oversight Committee, plan investigations into the Trump administration. "Lawyer up" was the two-word recommendation of Rep. Robert Garcia, a California Democrat.

What do economists expect from the new Congress?

Economists at Goldman Sachs, led by Jan Hatzius, said they expect the new Congress to limit the war with Iran and roll back select tariffs. At the same time, they expect Democrats to roll back spending cuts.

Those forecasts sketch a middle path: neither party gets its full agenda, but gridlock gives way to selective dealmaking on foreign policy, trade and fiscal policy.

What is the so-what?

The Evercore trade is deliberately cheap and asymmetric. Slightly out-of-the-money calls cost less than at-the-money contracts, so investors pay a small premium for a payoff that arrives only if the bipartisan scenario — and the FOMO rally it could trigger — actually happens. Whether Washington delivers is the open question the options market will now price.