(New York)

One of the big questions investors and analysts are still trying to sort out is who are the biggest market winners and losers as a result of the midterms. Here are some insights. The sector which seems likely to gain most is healthcare, as the risk of more regulation looks diminished, and the chances of increased government healthcare spending (as a result of the election of Democrats in key states) seems higher. The sectors which seem likely to lose out are banks and telecoms, both which seem likely to face much greater scrutiny by the now Democrat-led House.

FINSUM: We would also lump big tech into the losers category as increased scrutiny and regulation of the sector is one of the few areas of bipartisan agreement right now.

Published in Eq: Financials
Thursday, 08 November 2018 09:25

And the Big Midterm Winner is…Bonds

(New York)

Almost all of the market articles regarding the results of the midterms have been about stocks, including which sectors might thrive etc. But the real winner might be the bond market. Treasury yields have fallen and spreads between short and longer term bonds have tightened. The reason why is that traders see the forthcoming US budget as more conservative now that Congress is split. In particular, the market thinks there won’t be a big surge in infrastructure spending, and Treasury bond issuance will probably be tighter, both of which have conspired to boost prices.

FINSUM: It is quite odd to think that the election of a Democrat majority to the House would make the market expect more conservative fiscal policy, but the reality is that a divided Congress will probably be less fiscally loose because of gridlock.

Published in Bonds: Total Market
Wednesday, 07 November 2018 12:40

6 Sectors to Watch After the Midterms


With the midterms finally over, investors need to think critically about how the market will respond. In particular, specific sectors will have different reactions. With that in mind here are six sectors to watch. Drugmakers seem likely to be seen favorably as the split between the parties means new regulation governing prices seems less likely. Banks could go either way, but most expect Trump’s deregulatory agenda to continue. Technology is looking less favorable as regulation and scrutiny of the sector is one of the few areas of bipartisan agreement. Industrials are looking less favorable as well, as the odds of a big infrastructure package have decreased. Energy seems neutral, as no big changes appear likely. Finally, marijuana stocks are likely to jump.

FINSUM: There is going to be quite a range of reactions over the next few months as each sector digests how the newly split Congress will affect them.

Published in Eq: Total Market
Wednesday, 07 November 2018 12:37

Why the Midterm Result Will Be Great for Stocks


The midterms are finally over, and with it the possible end to the volatility of the last month. Many on Wall Street now say stocks are ready to gain as buying fever takes over. The election went almost exactly as expected, which has set up a possible goldilocks scenario for markets. With Congress split, it is likely that policy gridlock will take over, a situation many think is ideal for stocks. The idea is that the less government does, the more room the market has to operate uninhibited.

FINSUM: The key here is that a split Congress means there likely won’t be any huge policy changes over the next two years. That seems favorable for stocks given the political uncertainty over the last 24 months.

Published in Eq: Total Market
Wednesday, 07 November 2018 12:36

How the Midterms Will Reshape Muni Bonds


This midterm election might have ended up being very consequential for muni bond markets. Some in the muni market feared the possibility of the Republicans maintaining control of both the House and Senate because of how further tax changes could have hurt the finances of municipalities. However, now that Congress is split, the outlook seems more favorable. The reason why is that Congress now looks more likely to restore a tax exemption for a debt refinancing strategy that is often used by local governments.

FINSUM: Just like in other asset classes, having a split Congress looks favorable for munis.

Published in Bonds: Munis
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