Matson Money Founder and CEO Mark Matson gives the market outlook ahead of the 2022 midterm elections on “Maria Bartiromo’s Wall Street.”
As Americans prepare for Tuesday’s midterm elections to determine which party controls Congress, investors expect races significant impact on the stock market.
With polls showing a strong Republican lead in congressional races and tied in many Senate races, some traders are bracing for a GOP victory. Otherwise, the political stalemate caused by a divided government is also generally seen as favorable to investors who want their stocks unaffected by major political moves.
With the S&P 500 down nearly 21% last year, investors seemed to be betting on a Republican victory. A basket of stocks and other assets tracked by advisory firm Strategas that is expected to do well after a Republican win outperformed a peer Democratic portfolio, indicating a roughly 70% chance Republicans will win both the House and the Senate.
Defense spending is expected to rise regardless of which party takes power, signaling a positive future for shareholders. Experts say stocks of defense contractors such as Lockheed Martin (LMT.N) or Raytheon Technologies (RTX.N) would likely benefit significantly from a Republican sweep, as opposed to moderate growth with a Democratic majority.
A SIMPLE GUIDE TO THE MID-TERM ELECTIONS, HOW THEY AFFECT THE PRESIDENCY AND MORE
Investors are closely watching the outcome of Tuesday’s midterm elections. The results could have a major impact on the stock market. (Getty Pictures)
Pharmaceutical and biotech stocks should also benefit from a Republican victory, given recent legislation by Democrats to reduce prescription drug prices. While the S&P 500 Pharmaceuticals Index (.SPLRCCARG) is up about 1%, the S&P 500 Healthcare Index (.SPXHC) is down about 7%.
Energy stocks have had a great year, with the S&P 500 (.SPNY) energy sector skyrocketing more than 60% in 2022. While Republicans control both the House and Senate, the policies that encourage domestic energy production could be favorable to shareholders of oil exploration and pipeline companies.
President Biden speaks with the media before boarding Air Force One at Marine Corps Air Station Miramar in San Diego, Calif., Nov. 4, 2022. (Getty Pictures)
Clean energy stocks, on the other hand, will do well if Democrats drop out a surprise win. While Invesco Solar ETF (TAN.P) is down about 6%, legislation promoting solar power and other alternatives would boost the clean energy sector.
Cannabis stocks would also likely benefit from a Democratic victory, as they have historically been in the regulatory headlines. The AdvisorShares Pure US Cannabis ETF (MSOS.P) is down more than 55% this year.
The S&P 500 is down nearly 21% over the past year, although the S&P 500 energy sector (.SPNY) is up more than 60%. (AP Pictures)
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It’s unclear how big tech stocks would benefit from a midterm election result. Citi analysts predict that a republican majority would lead to a “legislative blockage, implying an additional positive effect for the category”. The Nasdaq 100 index (.NDX), which is heavily weighted towards tech stocks, fell around 33% in 2022.
Reuters contributed to this report.