Six Sectors Wall Street Is Watching After The Midterms

A split Congress may be good for pharma and banks, less so for tech.

By Felice Maranz

(Bloomberg) —Equity investors are eyeing six key sectors after the midterm elections which resulted in the Democrats seizing control of the House of Representatives, while Republicans maintained control of the Senate.

While S&P 500 futures edged higher, here are the sectors most likely to see moves:

  • Pharmaceutical and biotechnology stocks may gain if the stalemate takes away the threat of drug pricing restrictions, analysts have said.
  • They forecast that industrials would continue to languish under a divided government as a major spending package would be unlikely.
  • Technology stock investors can expect more regulatory scrutiny, an outcome analysts expected no matter where congressional control would up.
  • Banks and financial shares most likely won’t face tighter regulations as President Donald Trump’s regulators are firmly in place.
  • It’s more complicated for energy shares, with the outcome of local races setting the tone for oil and gas producers. Those results remained unclear.
  • And then there’s pot stocks. Marijuana legalization is on the ballot in four states, including recreational pot use in North Dakota and Michigan. Pot remains illegal at the federal level.

Meanwhile, most sectors have to deal with the trade war. Policy watchers are skeptical there will be a shift toward China on trade. Outside the U.S., emerging markets are seeing gains.

To be sure, some market watchers say not much will change and it’s mostly just about playing defense.

Greg Valliere, chief global strategist at Horizon Investments LLC, said the election may have “only a modest impact on investors” who have bigger macro worries, including rising interest rates. And CIBC’s head of portfolio strategy Ian de Verteui writes that “history suggests equities do fine post-midterms” even when they often result in the president’s party losing seats.

Here’s what Wall Street is saying about key industries to watch:

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