Although arguably most folks hate the political season due to the back-and-forth mudslinging that materializes, investors will want to pay close attention to the 2022 midterm elections. According to historical data, the midterms broadly kick off superior market performance.
Per U.S. Bank’s wealth management arm, “When the analysts looked at data around midterm elections (elections held in between presidential elections), they found that the S&P 500 consistently outperformed in the year after midterms compared with non-midterm years. Just like presidential elections, which party controls Congress generally was not a factor in projecting overall equity market performance.”
Also, on a historical note, U.C. Santa Barbara notes that rarely does the sitting president’s party gain seats in both houses of Congress. Therefore, the narrative suggests that Republicans may have a big day for the upcoming 2022 midterm elections. In addition, stocks widely may swing higher.
If this circumstance pans out – and please be aware no guarantee exists – then specific stocks just might outperform others. Below are market ideas that may benefit from a possible red wave.
Should equities rise following the midterm elections this year, then Caterpillar (NYSE:CAT) represents a must-watch stock. An industrial equipment manufacturer, Caterpillar has long been a favorite among conservative politicians. For instance, former President Donald Trump long talked about CAT during both the campaign and his presidency.
Headquartered in Deerfield, Illinois, the implications behind Caterpillar for Republicans presents an obvious platform. Conservatives can talk up the need to support American companies who then hire American workers. From there, Republicans can then parlay that into building meaningful infrastructure that aligns with principles such as national security.
On the other hand, control of Congress by the Democrats also features meaningful implications for Caterpillar. For instance, last year, President Joe Biden signed the $1 trillion bipartisan infrastructure bill. Naturally, such an initiative supports Caterpillar, making it one of the stocks to watch ahead of the 2022 midterm elections.
Axon Enterprise (AXON)
Given that history suggests the Republicans will control both houses of Congress following the 2022 midterm elections, investors ought to consider Axon Enterprise (NASDAQ:AXON). Manufacturing non-lethal solutions such as the Taser as well as police body cameras, Axon will be on the frontlines should conservatives win big this November.
A big narrative that has emerged in recent years is that Republican candidates have a tougher stance on crime. This, and concerns around defunding the police, have catalyzed “back the blue” agendas.
Under this context, Axon presents an intriguing profile because its products help get to the truth of the matter. Police bodycams help everyone understand what is happening day to day. Further, Taser deployment should cut down on controversial arrests, making AXON a potential buy ahead of the 2022 midterm elections.
Exxon Mobil (XOM)
In 2008 at the Republican convention, when Michael Steele, the former lieutenant governor of Maryland, uttered the line “Drill, baby, drill,” it epitomized conservative attitudes toward the hydrocarbon industry. To be fair, many Republicans support clean and renewable energy initiatives. Generally speaking, though, Republicans align themselves with hydrocarbons, boding well for Exxon Mobil (NYSE:XOM).
You know what else bodes well for Exxon? Science. Although it’s important to command energy diversity, it must be said that wind and solar represent intermittent sources. In other words, wind turbines don’t work well when the wind stops blowing. Similarly, when the sun sets, solar panels become effectively useless. However, “dirty” energy keeps chugging along, allowing them greater capacity factors.
Should Republicans gain control of Congress, look to XOM to swing higher. Another factor that may help vertically integrated hydrocarbon energy providers in general is Russia’s invasion of Ukraine. With Russia cutting off natural gas to Europe, prices may rise ahead of a harsh winter. Thus, XOM is one of the stocks to watch ahead of the 2022 midterm elections.
If we are going to mention capacity factor in the energy sector, nothing comes close to nuclear power. With the metric hitting 92.5% for nuclear facilities, these power sources are on virtually all of the time every year. However, people carry hesitation toward this sector for understandable reasons. If Republicans take Congress, however, Cameco (NYSE:CCJ) becomes intriguing.
One of the world’s largest providers of uranium fuel, Cameco cuts a controversial profile because of the underlying business. However, because of the massive global disruption this year, energy security became a hot topic, no pun intended. While renewable energy infrastructure buildouts present a solution, they’re not the solution.
Again, the reality comes down to science. One uranium fuel pellet carries as much energy potential as 149 gallons of oil. No other commodity comes close to this magnitude of energy density. Therefore, look to CCJ as a potential winner following the 2022 midterm elections if Republicans become victorious.
When it comes to deciphering winners and losers following the 2022 midterm elections, Boeing (NYSE:BA) presents an intriguing profile. The famed airplane manufacturer came under fire following fatal crashes involving the 737 Max 8 jetliner. Although the company attempted to spark a resuscitation, BA stock remains embattled. On a year-to-date basis, shares fell 35%.
However, if the Republicans come out victorious after the 2022 midterm elections, Boeing may finally be able to right itself. With conservatives controlling the legislative and judicial branches, they can implement a pro-business framework. As well, they may be able to force the Biden administration to capitulate to business-related demands. That should be positive for Boeing because it provides forward predictability.
At the same time, Democrats controlling Congress may also be positive for BA stock. Should Biden succeed in building back better per his campaign slogan, this could undergird expansion of mobility. In turn, the dynamic should be helpful for Boeing in the long run.
Geo Group (GEO)
If you’re going to talk about the 2022 midterm elections specifically, I don’t think you can ignore Geo Group (NYSE:GEO). The blandly titled company actually represents a private prison. Indeed, the idea of profiting off inmates brings up bad juju for many investors.
According to advocacy groups, Geo’s prisons and jails include immigration detention facilities and community corrections centers. Therefore, such institutions urge market participants to divest from GEO.
However, from a purely objective standpoint, GEO could rise if the Republicans take the 2022 midterm elections. Generally speaking, conservatives court a tough-on-crime image. As the AP reported, conservatives not being tough on crime can spark criticism from fellow Republicans. Therefore, just applying basic logic, GEO may rise if a red wave materializes.
To be 100% clear, I neither advocate nor condemn GEO as an investment. You do as you wish. However, it is fair to consider GEO as a real-time indicator of where the 2022 midterm elections are going.
According to conservative news outlet Newsmax, companies that don’t get involved in politics associated with social justice issues allegedly perform much better than those that do. One of the highest-ranking companies that feature a combination of brand popularity and being the least “woke” is confectionary specialist Hershey (NYSE:HSY).
Hershey apparently attracts a conservative-oriented crowd. Therefore, HSY could swing higher following the 2022 midterm elections as Republicans celebrate with their favorite chocolate bar.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.