White House is trying 'subtle' price controls - BofA

[Economic recession crisis affected on real estate business.]
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The Trump administration is increasingly using government intervention to manage the economy, a shift described as moving from an "invisible hand to visible fist," according to BofA strategist Michael Hartnett.

While no explicit price controls have been announced for 2025, the government is making subtle moves to control prices and boost supply in key areas, likely to prevent a politically unpopular second wave of inflation ahead of the midterm elections, Hartnett said.

The strategy has targeted several sectors. In energy (XLE [https://seekingalpha.com/symbol/XLE]), a policy of "drill, baby, drill" deregulation and efforts toward peace in Ukraine have been implemented, with energy stocks down 3% since the election. For healthcare (XLV [https://seekingalpha.com/symbol/XLV]), an executive order aims to lower U.S. drug prices to "Most-Favored-Nation" levels, and the healthcare sector has fallen 8% since the election. In housing, a "National Housing Emergency" has been declared to improve affordability by increasing supply, and homebuilders (XHB [https://seekingalpha.com/symbol/XHB]) have seen a 2% decline since the election.

Markets are playing these politics by shorting sectors that "whip inflation" and going long on sectors positioned to "outpace China" and create leverage for a favorable trade deal in 2026, he said.

Hartnett identified "national security winners" such as Big Tech/Magnificent 7, semiconductors (SOXX [https://seekingalpha.com/symbol/SOXX]) (SMH [https://seekingalpha.com/symbol/SMH]), and aerospace & defense (ITA [https://seekingalpha.com/symbol/ITA]) as sectors benefiting from this dynamic.

Utilities (XLU [https://seekingalpha.com/symbol/XLU]) are identified as the next most vulnerable sector. This is due to a vow from Trump to halve electricity prices within 12 months and concerns from the U.S. Energy Secretary about soaring electricity prices driven by demand from artificial intelligence.

Hartnett says those picks are likely to continue to benefit as long as President Trump's approval rating remains above 45%. But it warns the approach could "end poorly" if his approval rating falls below 40%.

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