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How To Invest After The Midterm Elections


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How To Invest After The Midterm Elections and New Congressional Priorities

Invest After The Midterm ElectionsWith the 2014 midterm elections giving control of the United States Congress to the Republican Party, a question on many investor’s minds is how to invest after the midterm elections? While the Democrats will maintain the power to filibuster bills under consideration in the Senate, and the President has veto power to reject bills, it is likely that some of the bills that affect specific industries in the United States will be pushed through Congress and signed into law.

Any changes passed by Republicans that become federal law over the next couple of years will affect certain sectors of the stock market. Four sectors in particular that may be impacted positively by the Republican takeover of Congress and their likely legislative agenda include energy, healthcare, financials, and defense.   Changes in laws, regulatory priorities, and tax policy under Republican legislative oversight is likely to help companies in all four of these stock sectors.

How To Invest After The Midterm Elections | Energy Stocks Will Get a Boost

The Midterm ElectionsThe energy sector in particular has had a rough time in 2014, as crude oil has sold off sharply since the summer of 2014.   Changes to national energy policy prompted by Republican legislation may give the energy sector a much-needed boost during 2015. Some companies within the energy sector will benefit more than others, if the Republicans can push their agenda through Congress and obtain the President’s signature.

Exploration and production companies are poised to gain, as more land is likely to be made available for crude oil drilling and fracking will likely face less regulatory roadblocks. Crude oil and natural gas pipeline companies, such as Kinder Morgan (NYSE: KMI), may benefit from a looser regulatory environment that creates more demand for their pipelines.   Companies involved in the Keystone crude oil pipeline project, including the company proposing the pipeline, TransCanada Corp. (NYSE: TRP), will benefit if the Republican Congress can gain approval for the pipeline.   Canadian oil producers, including Suncor Energy Inc. (NYSE: SU) and Canadian Natural Resources Ltd. (NYSE: CNQ), will also benefit from the completion of the Keystone pipeline.

Companies developing natural gas exporting facilities, such as Cheniere Energy, Inc. (NYSE: LNG) and Sempra Energy (NYSE: SRE), will benefit from a more favorable regulatory environment, since approvals for and operation of such facilities under Republican control of Congress will likely be easier.

Exxon Mobil Corp. (NYSE: XOM) and Continental Resources (NYSE: CLR) will benefit if the United States lifts the ban on exporting crude oil, due to Republican Congressional pressure or legislative action. However, refining companies may be on the losing end if the Republicans end the ban on importing crude oil from the United States. Much of the refiner’s business currently involves refining crude oil produced in the United States into finished products that can be exported overseas. If crude oil can be exported directly, refiners will see a significant negative impact on their business and revenues.

Two other aspects of the energy sector that may benefit from Republican control of Congress are nuclear power and wind power.   Although Republicans express free-market principles, they also support financial and regulatory support for favored industries. Nuclear power has a lot of support among Republicans because it is seen as an alternative to other power sources that are losing popularity, such as coal.   Wind power has the support of Republican legislators from states with large wind power installations.

A long-shot investment that could be made in the hopes that Congressional Republicans are successful with altering the energy landscape is an investment in badly beaten down coal stocks. While coal’s best years may be behind it, Republican policy chances could cause a modest rebound in the fortunes of coal companies.

How To Invest After The Midterm Elections | Changes In Heathcare Are Likely

HumanaIn the healthcare sector, look for companies that produce medical devices to rally in anticipation that the Republicans will successfully repeal the medical-device excise tax that was included in the Affordable Care Act. Given the fact that some Democrats also support the repeal of this tax, it seems likely that it will be repealed during the next Congressional session.   Medical-device makers, such as Boston Scientific (NYSE: BSX) and St. Jude Medical Inc. (NYSE: STJ), will benefit.

Other companies is the healthcare sector that may benefit from Republican policies include managed care companies, as healthcare reforms passed by the new Republican Congress will likely include increased emphasis on managed care providers that offer Health Maintenance Organization (HMO) healthcare coverage to keep medical costs down. Humana (NYSE: HUM) is a managed care company to keep an eye on in this regard.

How To Invest After The Midterm Elections | Financial Services Companies Will Have An Easier Operating Environment

Financial services stocks, from retail to money-center to investment banks, will also likely experience a boost to revenues and stock prices, as the Republicans seek to loosen some of the Dodd-Frank regulations that were put in place in the wake of the financial crisis of 2008/2009.   The Republicans will likely weaken the Consumer Financial Protection Bureau that was created after the financial meltdown to protect consumers from illegal and controversial banking practices.   Financial institutions across the board should benefit for this more friendly operating environment. Big money center banks, such as Bank of America (NYSE: BAC) and Citigroup (NYSE: C) could be winners if regulatory pressures are lessened and their earnings normalize to pre-meltdown levels.

How To Invest After The Midterm Elections | Don’t Forget About Defense Stocks

While defense spending has gotten a boost lately, due to the threat posed by terrorist groups in the Middle East, Republicans in control of Congress should steer additional financial resources towards the military and defense contractors. The defense sector should see a boost in revenue from increased government spending, as the Republicans seek to put their imprint on military efforts in the Middle East. Defense contractors, such as Raytheon (NYSE: RTN) and Lockheed Martin (NYSE: LMT) will benefit from the additional emphasis on defense spending.

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