JPMorgan’s top stocks if GOP tax reform is successful

Bill Clark | CQ Roll Call | Getty Images

Speaker of the House Paul Ryan, R-Wisc., left, Senate Majority Leader Mitch McConnell, R-Ky., and Sen. Orrin Hatch, R-Utah, participate in the Congressional GOP media availability to unveil the GOP tax reform plan in the Capitol on Wednesday, Sept. 27, 2017.

The Tax Cut and Jobs Act proposed by House Republicans last week could be a “significant source of upside” for U.S. equities, according to one of JPMorgan’s top analysts.

The corporate portion of the plan will prove “meaningful” and could boost S&P 500 earnings by as much as $12 per share, according to Dubravko Lakos-Bujas, JPMorgan’s U.S. head of Equity Strategy.

“Given the current plan is more aggressive than the original House Blueprint, we now expect a larger upside for the market,” wrote Lakos-Bujas on Wednesday. “This catalyst could trigger significant rotations with elevated dispersion across style, sector, and size, which could represent an opportunity for active managers.”

Even though cost-effective passive management has grown popular in recent years, a marked shift in sector leaders could be just the nudge investors need to give active management a second look. As major tax cuts tend to benefit domestic companies with higher effective rates, Wall Street traders may want to keep an eye on two sectors in particular.