US Midterm Election 2022: Wall Street Gives 70% Chance for GoP Control of House and Senate; Here's How Stock Markets Would React

The Wall Street has factored in a 70 percent chance of the Republicans wresting the control of the US House of Representatives and the Senate, with just hours left for the results of the US mid-term elections.

According to a major advisory firm that tracks the US stock markets, stocks that tend to do better under a Republican-controlled government have outperformed the stocks that appear to thrive under a Democrat-controlled parliament.

New York Stock Exchange
New York Stock Exchange Wikimedia Commons

The elections will determine who gets to control the House as elections are held in all 435 Congress seats across the country. This year, elections are also conducted in 35 Senate seats, while new governors will be elected in as many as 36 states.

GoP Picking More Momentum

According to the latest opinion polls, the Republicans have picked up more momentum ahead of the polls, which take place on Tuesday, November 8. The GoP is more than likely to take control of the House while the 50-50 tie between the parties in the Senate is also likely to be broken to install a slim GoP majority.

This scenario means there will be a split government, wherein the White House will struggle to push through its legislative agenda in Opposition-controlled House and Senate. What this means for the markets is, ironically, a sense of stability. A legislative stalemate means that there will be fewer policy reforms that potentially keep the markets on the tenterhooks.

While sectors like defense, energy, healthcare and security will benefit from a Republican victory, clean energy, and cannabis sectors will be favored by the Democratic victory, Reuters reported, citing advisory firm Strategas.

Focus on Energy, Defense

If the Republicans get to sweep both chambers of the Congress, there will be increased focus on the defense sector. Defense spending will rise significantly under a GoP-controlled Congress, UBS Global Wealth Management has said.

Similarly, according to Citi analysts, energy stocks will be benefited if the GoP wins. The Republicans normally install policies that encourage more energy production. However, companies in the clean and alternative energy segments will thrive under a Democratic-controlled dispensation.

While pharmaceutical and biotech companies will relish a GoP-controlled Congress, Cannabis stocks will love a Democrat-controlled dispensation as the Dems favor regulatory reforms that make cannabis use more popular.

Congress
US Congress Lars Di Scenza / Wikipedia Commons

Another sector that would see spurt in growth if the GoP takes control of Congress is the security sector, with border security and private prisons likely to get more attention under the GoP.

Key Numbers

The 2022 midterm elections are conducted in all 435 Congress seats across the country. The House of Representative members have a tenure of 2 years and elections are conducted in November every other year. However, the tenure for Senators if 6 years, and this means one third of the members are re-elected every two years. This year, 35 Senate seats are contested. Also, as many as 36 states will elect new governors.

Vote
Inside a polling station in the United States YouTube Grab

Key Issues

Most Americans think the biggest election this year is economy. According to Pew Research, more than 80 percent of Americans think the economic conditions are poor. Other big issues are the supreme court verdict on abortion and rising gun violence. A lot of Americans are also concerned about the future of democracy.

When Will Results Come?

The counting of votes will start after the polls close on the voting day, Tuesday, November 8. Early results will arrive by midnight and the final tally will be known by the morning of November 9.

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