Markets Expect Political Gridlock But Are Worried About Taxes
Winners and Losers
Valliere said a big theme in the new Congress will be austerity. "I think we'll see a defacto freeze on spending for the next two years...my personal view is you could not pick a worse time for austerity. You've got an ailing patient and let's put some leaches on the problem, but that's what the public wants," he said.
"I think much of the defense budget will be frozen. Anything that relies on Washington is going to get a hair cut," he said.
Managed care companies could see a minor benefit from a Republican win in the House, but the GOP would have to take both Houses for gains to stick, Clifton said. He expects a Republican House would try to roll back health care reform, but the effort would end there.
"You get a rally in managed care, but it's temporary. Energy has real issues...if the Republicans win the Senate, then that really changes the game," he said. In addition to working up new regulations on offshore drilling, Strategas points out the EPA is studying fracking with the goal of taking regulatory authority over the process, and the GOP is more likely to favor the current state run regulatory structure.
Energy companies could be among the biggest winners if Republicans increase their numbers as expected. For one thing, the House Natural Resources committee would be chaired by Rep. Doc Hastings of Washington. Hastings was against the moratorium on new drilling and tried to stop a bill that would impose new safety standards on offshore drilling.
"There's a lot in the air for energy in this election," said Clifton. Republicans would also have a more favorable industry view on issues of cap and trade, taxation, and Environmental Protection Agency oversight.
On the outside chance Democrats hold onto the majority in the House, Clifton sees municipal bonds, dividend paying stocks, infrastructure companies, clean energy firms and communications companies as better bets.
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