Sen. Elizabeth Warren's recent surge has some on Wall Street predicting she will unseat former Vice President Joe Biden as the Democratic front-runner, and they are getting clients ready for the possibility she wins the presidency with investment recommendations. Based on recent polling data, Warren's focus on grassroots and favorability among her supporters, Wall Street is underestimating the odds of her success, according to Raymond James strategists Ed Mills and Chris Meekins. "We believe Warren is within striking distance of winning both the nomination and White House," Mills and Meekins wrote. "While countless external events can and will happen between now and Election Day, we believe that the market underappreciates Warren's ability to capture the nomination and win the Presidency." While the brokerage noted that their base case is still for President Donald Trump to clinch a narrow victory, his edge in key battleground states appears to have "a ceiling." A ceiling, Raymond James thinks, Warren may have the best shot of using to her advantage. But what a Warren presidency could mean for health care, technology or fossil fuels stocks remains a looming question for those looking to play a potential Democratic upset in 2020.

Duel of the populists?

In the 2016 election, the strategists explained, 158 electoral votes were decided by the winner receiving under half of the vote. The analysts said that is likely good news for the Democrats, who start the 2020 campaign with a 188-125 base advantage. Trump won Michigan, Pennsylvania, Florida, Arizona and Wisconsin in 2016 with less than 50% of the vote, Mills and Meekins continued. If the Democrats manage to flip just Michigan, Pennsylvania and Wisconsin (which all elected Democratic governors in 2018), they would win the White House. "Warren's rise in the polls is different than the viral moment producing highs that [South Bend, Indiana, Mayor Pete] Buttigieg and [Sen. Kamala] Harris enjoyed briefly in the campaign thus far," the Raymond James strategists wrote. "She is having steady and strong debate performances, but really her rise is a result of grassroots support." The latest Quinnipiac poll showed Warren "essentially tied" with Biden, with the former vice president garnering 25% of Democratic voters and independents who lean Democratic versus Warren's 27%. The top two candidates were followed by Sen. Bernie Sanders, I-Vt., at 16%, Buttigieg at 7% and Harris, of California, at 3%. Though Warren and Trump differ widely on nearly every policy, part of the Democrat's success stems from her use of the populist rhetoric that Trump uses in his own messaging, the strategists said. Populism is a political approach that seeks to appeal to ordinary citizens who feel that their well-being — economic, social or otherwise — is being exploited by elites.

Senator Elizabeth Warren, a Democrat from Massachusetts, questions John Stumpf, chief executive officer of Wells Fargo & Co., during the Senate Committee on Banking, Housing, and Urban Affairs in Washington, D.C., U.S., on Tuesday, Sept. 20, 2016. Pete Marovich | Bloomberg | Getty Images

As such, both Warren and Trump are quick to identify a "boogeyman" responsible for the variety of issues facing the political world, the strategists said. For her part, Warren often makes headlines for her broadsides against CEOs and other corporate bigwigs at the head of fossil fuel companies, drugmakers and banks. Some of her more notable tirades targeted then-CEOs John Stumpf and Tim Sloan, who each resigned from Wells Fargo after failing to stem criticism about the bank's unscrupulous sales practices. warren tweet "The more Senator Warren is criticized, her supporters appear to become more loyal. Attacks on her do not seem to stick in the same way they do on other politicians," Mills and Meekins wrote. "Republicans seem convinced that the nomination of Warren would guarantee the reelection of Trump, in what seems like a repeat of how Democrats were openly wishing Republicans would nominate Trump in 2016." Trump, too, spends much of his public outreach criticizing those not in his direct command for a host of national problems, including the rising cost of health care. "Right now, every incentive is for the drug company to have a very high list price and to negotiate list price down, often in a very nontransparent way," Trump said in 2018.

"Everyone involved in the broken system — the drugmakers, insurance companies, distributors, pharmacy benefit managers and many others — contribute to the problem," Trump added at the time. "Government has also been part of the problem because previous leaders turned a blind eye to this incredible abuse." House Speaker and leading Democrat Nancy Pelosi announced on Sept. 24 that the chamber would begin a formal impeachment inquiry against Trump, accusing him of jeopardizing the nation's security by seeking to recruit the help of Ukraine to investigate Biden and his son for prior business dealings in the region.

'Doubts may be creeping in'

But Raymond James wasn't the only investment firm touting Warren's Oval Office odds this early in the game, months before the first nominating contests of 2020. RBC Capital Markets in its quarterly "The Mood of the Market" noted that "most investors still expect Trump to be re-elected – but doubts may be creeping in." The firm conducted a survey from Sept. 16-23 of 140 equity-focused institutional investors and found that while many are divided on most of the major issues facing the broader stock market, they grew more optimistic in general since June. Chief equity strategist Lori Calvasina explained that while two-thirds of survey respondents said they expected Trump to win in 2020, the figure represents another modest decline versus prior polls. Meanwhile, those who say a Democrat will win came in at 34% versus 24% in the bank's March survey. Expectations that front-runner and relative centrist Joe Biden will clinch the party's nomination have also faded, RBC's survey showed. "In our September poll, those expecting Biden to win the nomination were still a majority (53%), but had fallen sharply," Calvasina and her team wrote. "Meanwhile, while those expecting Warren to win rose substantially, accounting for 39% of respondents (up from 7% in our June poll)." While Wall Street's predictions may suggest growing support for Warren, those conducting the surveys don't appear keen on the senator. Several Democratic donors on Wall Street and c-suites told CNBC that they're preparing to sit out the presidential campaign fundraising cycle — or even support Trump — if Warren garners the party's nomination. "You're in a box because you're a Democrat and you're thinking, 'I want to help the party, but she's going to hurt me, so I'm going to help President Trump,'" a senior private equity executive told CNBC's Brian Schwartz last week. That sentiment also appeared in the RBC survey analysis, with nearly 90% of respondents seeing a Democratic sweep of the White House and both chambers of Congress as either bearish or very bearish for the stock market. Most see Democrats maintaining control of the House of Representatives and Republicans keeping the Senate. "Importantly, more than half still view a Biden victory in the race for the White House as a neutral event for stocks, while the vast majority view a win by another, more progressive Democrat as a negative stock market event," Calvasina wrote.

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