Traders work on the floor of the New York Stock Exchange, Aug. 22, 2016.Michael Nagle/Bloomberg
The central bank put is giving way to the "Keynesian put," according to Merrill Lynch.
With long-term borrowing rates for most developed nations sitting near record lows, and the potentially perverse effects of lowering rates below zero widely on display, a growing chorus of economists have made the case that governments should work harder to support slow-growth economies by spending more money.
Merrill Lynch's clients are begging for more investment from governments and businesses alike – and chief investment strategist Michael Hartnett is confident that there's help on the way from fiscal policy, as events like the Brexit referendum underscore voters' demand for a more populist set of solutions.
"Electorates are increasingly voting for policies to address wage deflation, immigration and inequality," he writes.
"The capitalist, monetarist, globalist consensus of recent decades is now under threat and policies that are more socialist, Keynesian, and protectionist are being promised."
Governments' pivot to play a larger role in boosting economic activity will be reflected in financial markets, argues Merrill's team.
Mr. Hartnett previously outlined the case for shifting from financial to real assets (like commodities and real estate) in order to benefit from the switch, but have also seized upon the work of the bank's global equity analysts to highlight 150 stocks from around the world that would be poised to reap gains if government purse strings do indeed loosen en masse.
"As policy shifts from the exclusive and extensive use of monetary policy in recent years to create growth, to a more strategic and balanced mix of fiscal and monetary policy, we believe asset allocators should rebalance portfolios away from the 'QE winners' toward assets and sectors that should benefit from more fiscal largesse such as companies with exposure to Main Street, infrastructure, defense, and real assets," he writes.
"Infrastructure and construction companies dominate, comprising 61 per cent of the list; 15 per cent of the likely beneficiaries are in technology, networking, and cybersecurity.
"Energy, defence, and health care companies represent 12 per cent of the other fiscal beneficiaries."
Ahead of the U.S. election, both Hillary Clinton and Donald Trump have pledged to step up infrastructure spending if elected president.
To this end, Merrill Lynch's list (see list below) includes 35 firms listed in the United States that span a dozen industries.
These companies have exposure to public construction projects, traditional government spending priorities like defence and 21st-century infrastructure options like Barack Obama's "broadband stimulus fund" or renewable energy tax credits.
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Firms that will benefit from possible fiscal policy pivot
AECOM (ACM-N)
Analog Devices Inc. (ADI)
Armstrong World Industries Inc. (AWI-N)
AT&T Inc. (T-N)
Autodesk Inc. (ADSK)
Ball Corp. (BLL-N)
Blueknight Energy Partners LP (BKEPP-Q)
Boeing Co. (BA-N)
Caterpillar Inc. (CAT-N)
CSX Corp. (CSX-Q)
Delphi Automotive PLC (DLPH-N)
Ford Motor Co. (F-N)
Frontier Communications Corp. (FTR-Q)
General Dynamics Corp. (GD-N)
General Motors Co. (GM-N)
HD Supply Holdings Inc. (HDS-Q)
Illumina Inc. (ILMN-Q)
Kansas City Southern Industries Inc. (KSU-N)
L-3 Communications Holdings Inc. (LLL-N)
Lockheed Martin Corp. (LMT-N)
Martin Marietta Materials Inc. (MLM-N)
Maxim Integrated Products Inc. (MXIM-Q)
NextEra Energy Inc. (NEE-N)
Northrop Grumman Corp. (NOC-N)
NXP Semiconductors NV (NXPI-Q)
Owens Corning (OC-N)
Raytheon Co. (RTN-N)
Terex Corp. (TEX-N)
Texas Instruments Inc. (TXN-Q)
Thermo Fisher Scientific Inc. (TMO-N)
Union Pacific Corp. (UNP-N)
United Rentals Inc. (URI-N)
Verizon Communications Inc. (VZ-N)
Vulcan Materials Co. (VMC-N)
Windstream Holdings Inc. (WIN-Q)
Source: Merrill Lynch via Bloomberg