On Nov 7, stocks rallied following the U.S. midterm election results, as investor sentiment got a boost, which helped lift a cloud of uncertainties weighing on markets. The results fell almost in line with predictions, with Democrats gaining control of the House, while Republicans expanding their majority in the Senate, thus delivering a divided Congress.
Understandably, investors have been expecting the tone of politics to somewhat change post the results that could largely impact the markets. It goes without saying that with Congress divided now, certain sectors will breathe a sigh of relief, while a few might come under pressure.
That said, markets have already been suffering for a while now and the midterm election results have once again reinstated investors’ confidence in stocks, which saw both the Dow and the S&P 500 posting their biggest gains since the day after the 1982 midterm election results, when the indexes gained 4.3% and 3.9%, respectively.
Industrials, Technology to Benefit
Markets have been suffering since President Donald Trump imposed tariffs on a wide array of Chinese imports. China in retaliation has imposed tariffs on a similar amount of goods imported from the United States. So far, both countries have implemented tariffs on $50 billion worth of goods each.
The tit-for-tat tariffs have been taking a toll on stocks, particularly industrial and tech stocks. Now, with Democrats in control of the House, Trump could be compelled to soften his aggressive trade tactics with China. On Wednesday, shares of Caterpillar, Inc. (CAT - Free Report) , 3M Company (MMM - Free Report) and The Boeing Company (BA - Free Report) jumped 4.5%, 3.1% and 1.5%, respectively. Boeing has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Likely Congressional investigations could lead to a softening of trade policies by the Trump administration. Auto and tech stocks, which have been already been bearing the brunt of Trump’s tariffs, rallied post election results.
Shares of Fiat Chrysler Automobiles N.V. (FCAU - Free Report) , Ford Motor Company (F - Free Report) and General Motors (GM - Free Report) increased 2.9%, 0.6% and 1.2%, respectively. Shares of Micron Technology, Inc. (MU - Free Report) , NVIDIA Corporation (NVDA - Free Report) and Intel Corporation (INTC - Free Report) jumped 2.8%, 1.3% and 3.1%, respectively.
Materials to Get Support
One of the few things both Democrats and Republicans are supportive of is infrastructure reform. This will definitely give confidence to construction material and equipment makers.
Shares of United Technologies Corporation (UTX - Free Report) and United Rentals, Inc. (URI - Free Report) gained 2% and 1.2%, respectively, while Honeywell International Inc. (HON - Free Report) increased 1.1% on Wednesday.
Will Drugmakers, Energy Companies Come Under Pressure?
Analysts believe that Trump along with Congress will now get a common ground to reduce drug prices. Pricing of high-profile medicines could come under scrutiny, thus creating pressure on drugmakers and healthcare companies. In the past three years, revenues for some of the biggest medicines have been hugely dependent on price hikes. Democrats could now also try and push for Medicare-negotiated prices, which could further weigh on drugmakers.
Shares of integrated oil majors as well as exploration and production, refining and drilling companies could take a beating, as the Democratic House will surely try to reverse the easing of environmental regulations by the Trump administration.
Looking for Stocks with Skyrocketing Upside?
Zacks has just released a Special Report on the booming investment opportunities of legal marijuana. Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look.
See the pot trades we're targeting>>