The polarization in the U.S. political scene is likely to frustrate most folks. However, as an investor, the 2022 midterm elections warrant close attention. History tells us the midterms typically kick off superior performance for equity markets.
It’s been a horrible year for investors in the stock market, but it has followed the general pattern before the midterms, where stocks tend to shed a ton of value. Stocks usually bottom out in October and usually mount an incredible comeback in the following months. The S&P 500 has historically outperformed in the 12 months following the midterms compared with non-midterm years.
Naturally, which party controls the house is a critical part of the equation for a business. Though signs point towards a win for the Republican Party, nothing can be concluded for sure. However, the stances of the Democrats and the Republicans on various topics are imperative for investors to cash in on the upcoming election’s tailwinds. Having said that, here are three stocks that have plenty riding on the upcoming midterm elections.
Shares of Coinbase (NASDAQ:COIN) caught fire after debuting on the U.S. stock markets last year. COIN stock peaked at $369, but shares of the crypto exchange have tanked since then, shedding over 80% of its value. Naturally, its lackluster performance is attributable to the sluggish crypto market. However, its long-term positioning in the sphere remains intact with the step-changes in the crypto market.
The consensus is that the Democrats are perhaps the more skeptical of cryptocurrencies. Key party leaders like Senator Elizabeth Warren have been remarkably critical of the sector. Moreover, last month, U.S. President Joe Biden added to a previously approved framework for crypto regulation with a focus on consumer protection. It raises some fundamental concerns which are likely to jeopardize innovation in the sphere. Hence, if the Democrats remain in office, COIN stock and the crypto sector, in general, could face more regulatory headwinds.
Exxon Mobil (XOM)
Exxon Mobil (NYSE:XOM) is one of the leading oil and gas giants which has dominated the integrated midstream space. Rising oil prices this year have helped Exxon post record profits, with revenues growing by double-digit margins. In all likelihood, the momentum should continue for the foreseeable future, especially with higher European oil demand. Moreover, oil prices have historically beaten inflation, and I expect fuel prices to at least keep up with rampant growth in inflation in the future.
Republicans have typically aligned themselves with hydrocarbons which bode incredibly well for XOM stock. With the Republicans likely to eke out a win in the upcoming elections, traditional energy players such as Exxon could see their shares swing higher. Moreover, with the stock trading at a bargain, it’s an excellent time for investors to wager on it for the long haul.
CME Group (CME)
CME Group (NASDAQ:CME) operates contract markets for futures and options trading. It operates multiple exchanges which facilitate the purchase of commodities. Its business model has provided robust cash flows, rewarding its shareholders impressively.
However, to control inflation, the U.S. Government could crack down on commodity speculation hurting CME. The Democrats have been highly critical of Wall Street speculators and how they have fueled inflation. Recently, Ro Khanna, a leading voice in the Democratic Party, urged the government to eliminate a loophole that allows speculators on Wall Street to wager on commodity prices. Hence, if the Democrats regain control of the House and inflation runs rampant, CME stock could see a significant drop in its price.
On the date of publication, Muslim Farooque 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.