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Opinion: 21 stocks that would win with a Republican Congress

Published: Nov 1, 2014 7:00 a.m. ET

Energy, medical-device and housing companies would gain an edge if the GOP takes the Senate

By
MichaelBrush
Columnist


It’s the elections, stupid!

Many investors are so focused on headline-grabbing issues like global growth and Fed interest rate policy, they’re missing two key election themes telling us it’s time to overweight stocks. Consider these compelling data points.

1. Stocks do amazingly well after mid-term elections.

Since 1950, the S&P 500 jumped 16%, on average, in the six months following midterms. The market was green following all 16 of them, points out Bob Doll, chief equity strategist at Nuveen Asset Management.

Since 1928, the market advanced 7%, on average, and it’s been positive 86% of the time in the three months following midterms, notes Barclays Capital strategist Jonathan Glionna.

Why is this? Markets hate uncertainty, and elections remove uncertainty, says Doll. It doesn’t matter which party wins.

2. Stocks perform great in the third year of a presidential term.

That’s next year. On average, the stock market has gone up over 18% in the third year since 1950, compared to about 11% for the next best year (the fourth year), says Doll. This happens because presidents are trying to pump up the economy to sway the next election, speculates Marshall Nickles, an economics professor at Pepperdine University.

Layer on a few bullish trends — economic growth continues to improve, low inflation gives the Fed room to hold off on rate hikes, and lower gasoline prices are fattening wallets — and now seems to be a good time to be in stocks, concludes Bruce Bittles, chief investment strategist at brokerage firm Robert Baird.

How might this outlook go wrong? Past patterns don’t always repeat. The sample size here is small. Plus, market breadth was narrow in the recovery off October lows, suggesting a retest could be in order before stocks move higher, says Bittles. Still, the backdrop looks bullish.

Winners and losers with a Republican Congress: That’s the big picture. Of course, certain sectors do better or worse depending on which party wins.

Here’s my take on this: There’s a 70% chance Republicans will take the Senate, and control Congress.
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http://www.marketwatch.com/story/21-stocks-that-would-win-with-a-republican-congress-2014-11-01?siteid=rss&rss=1