H2 Washington Roadmap: Constructive, With Five Tail Risks

Research evidence excerpt

H2 Washington Roadmap: Constructive, With Five Tail Risks

Global | Washington Strategy July 2, 2026

H2 Washington Roadmap: Constructive, WithH2 Washington Roadmap: Constructive, With

Five Tail Risks Five Tail Risks

We expect Washington policy noise to fade over the next 6 months, with the

H2 backdrop constructive for U.S. assets absent 5 tail risks we monitor, ranked

.by probability: 1) Democratic Socialists go national (med); 2) NY data center Source: Jefferies

moratorium passes (med); 3) Warsh reshapes Fed further than markets expect

(low-med); 4) Defense spending surprises to upside (low); 5) U.S. takes military

action (low). Replay & PPTs inside.

.

We expect Washington policy noise to fade over the next six months. Washington has moved

beyond last year's shock-and-awe into a structural repositioning that markets have absorbed (see

here). Few major legislative or executive shocks are expected before the November midterms.

Post-midterms, the base case is a Democratic House and Republican Senate, producing divided

government and gridlock—historically supportive for U.S. equities (see here & here).

We see the following tail risks:

1) Democratic Socialists of America (DSA) go national. Recent NYC congressional primaries saw

Aniket Shah, PhD * | Head of Sust. &

DSA-aligned candidates win 3-for-3, unseating two incumbents. DSA members are also driving data Transition Strategy

center moratorium bills in states like NY and WI (see here & here). Positive perception of socialism +1 (212) 323-3976 | ashah14@jefferies.com

within the Democratic Party has risen materially over the past 15 years, with upcoming Michigan Yujin Kim * | Sust. & Transition Strategy

primaries as the next test. A broader trend could reprice equities for higher corporate taxes and Associate