A week after the 2022 midterm elections, the dust has finally settled. While the Democratic party has managed to retain control of the Senate, it is finally confirmed that Republicans have taken back the House of Representatives. While markets have rebounded since their pre-election decline, one thing is clear: the U.S. government is destined for partisan gridlock over the next two years. Investors are wondering about the best stocks to buy to avoid losses as market momentum shifts.
However, this outcome could be excellent for some sectors, as Wall Street tends to embrace political gridlock. As InvestorPlace reports:
“While Wall Street traditionally hates an uncertain economic landscape, it loves political gridlock. In fact, history indicates that markets are destined for a strong turnaround in 2023. And a divided government could be exactly what they need.”
That said, changes are afoot as market tides prepare to shift. This new government gridlock will likely mean that initiatives geared toward investing in clean energy and combating climate change will have a hard time succeeding. It does not necessarily mean that significant structural changes to the economy should be expected, though. As economist Allison Schrager recently speculated, Republican leaders haven’t actually laid out any concrete plans to lower inflation or avoid a recession. However, certain industries have a long history of succeeding under Republican leadership.
Let’s take a look at the best stocks to buy for a Republican-led House.
|AAP||Advance Auto Parts||$147.56|
When Republicans take back power, it’s always a good day for Big Oil. Several prominent oil stocks rose last week before the votes had been counted in anticipation of a shift in power that veered toward the right. ExxonMobil (NYSE:XOM) helped lead the charge forward. Now, this oil giant is well positioned to keep rising under an administration that values its sector. Exxon has found ways to deliver consistent returns even through turbulent times for the oil and gas industry. As InvestorPlace contributor Faizan Farooque notes, its unique track record makes it a stock to buy regardless of whether crude oil prices rise or fall.
Fellow experts such as Josh Enomoto have praised the stock as a post-election winner. “Neither Democrats nor Republicans can afford to be too fanatical about the energy-versus-environment debate,” he noted. As his case makes clear, XOM is well-positioned to rise in the coming months as the U.S. shifts toward a political landscape that focuses more on fossil fuels and less on energy alternatives. As long as one side is on the side of the oil and gas sector, XOM will remain one of the best stocks to buy.
SoFi Technologies (SOFI)
SoFi Technologies (NASDAQ:SOFI) is a company that is perfectly positioned to benefit from the payment rush for which the U.S. is bracing. One surefire bet as Republicans regain power is that the moratorium on student loan payments will be ending. That makes this an optimal time for borrowers to refinance their student loans, especially since President Joe Biden’s student debt forgiveness plan is currently hanging in the balance. Regardless of whether or not it moves forward, the personal finance space will see a rush within the coming months as millions of Americans get ready to resume student loan payments.
While SOFI stock has been declining lately, many experts remain bullish on it. InvestorPlace Senior Investment Analyst Luke Lango predicts gains of 25x over the coming decade, describing it as the “Amazon of Finance.” Institutional investors such as Vanguard and BlackRock (NYSE:BLK) have been doubling down on SoFi lately in preparation for post-election gains. Its current low price point represents an excellent buying opportunity for investors looking to cash in on the next personal finance boom.
Goldman Sachs (GS)
Like oil, finance is an industry that Republicans love. The party has a long history of rolling back the regulations put in place to curb Wall Street’s power. It’s a safe bet that anytime a shift in government puts Republicans back in power, it will generate the type of momentum that makes financial services stocks some of the best stocks to buy. And anytime the financial sector is pushed upward, Goldman Sachs (NYSE:GS) will be at the top. The leading investment banking tends to set the course that other Wall Street institutions follow, good or bad. And with Republicans now controlling Congress again, Goldman is well positioned to soar.
Unlike some of these stocks to buy, GS performed well in the months leading up to the midterms. The investment banking giant blew past Wall Street expectations when it reported Q3 earnings. On top of that, it reported impressive revenue growth from its bond trading unit. As InvestorPlace contributor Joel Baglole notes, the company “goes from strength-to-strength in any type of market.” Now, with a Republican-controlled House, market conditions are even more in its favor.
The financial services sector is more than just investment banks. It also includes the companies that produce popular credit cards. Despite a turbulent year, Mastercard (NYSE:MA) has managed to rise steadily all month and has only dipped slightly for the past six. Now it stands to benefit from the same pro-business policies that Goldman Sachs and its peers are expecting from the new Republican House in 2023. Other credit card providers will benefit as well, but as the leader in the space, Mastercard has a clear advantage.
The company also boosts encouraging financials for cautious investors. InvestorPlace contributor Muslim Farooque attributes this impressive performance to healthy consumer spending, which he doesn’t expect to slow down in 2023. He states:
“Over the years, it has evolved into more than a payments processor, dabbling into value-added services which often complement its payment network offerings. Hence, it continues to benefit from networking effects and its massive scale.”
Despite a turbulent month, MA stock has performed very well since the midterm elections, rising more than 5% and 14% for the month. The trends that have made Mastercard a reliable performer won’t be subsiding as market conditions swift in its favor.
Advance Auto Parts (AAP)
Republicans love to tout the importance of “buying American,” and companies like Advance Auto Parts (NYSE:AAP) give investors a chance to do exactly that. The auto parts retailer is a leader in its space with plenty of brand-name value on its side. More importantly, it is the type of stock that can benefit from the harsh economic headwinds that push many other stocks down. This isn’t a great time to be buying cars, as is evident from the harsh analyst ratings being filed on stocks like Carvana (NYSE:CVNA). That means the auto part retail market will be healthy heading into 2023 as Americans hang onto their old cars longer.
A Republican-controlled congress could be exactly what Advance Auto Parts needs. It could mean less funding for the electric vehicle (EV) sector, creating more demand for the parts that keep gas-powered vehicles running. As a result, AAP is in a prime position to grow, particularly as more Americans are holding onto their cars and not trading them in as quickly. In addition, the company boasts strong fundamentals and even comes with a meme-stock following, both of which stand to boost shares in 2023 as these trends continue.
Teladoc Health (TDOC)
Republicans have made it clear that they intend to cut social security and Medicare. This will lead to an uncertain world for many Americans who may not have the health coverage they need. The last time Americans were in desperate need of telehealth solutions, Teladoc Health (NYSE:TDOC) skyrocketed to new heights. Now, this pandemic winner is poised to skyrocket again as Americans brace for a world without health coverage and the means to pay for surgery and medication. TDOC is still battling difficult market forces, but it recently reported impressive Q3 earnings that hinted at solid growth prospects.
Despite a highly turbulent year coming off its Covid-19 pandemic high, Teladoc has spent the past month rising steadily. It is a favorite stock of contrarian investor Cathie Wood, but as InvestorPlace contributor Chris MacDonald notes, this beaten-down stock has plenty who recommend it. It operates in a highly defensive sector and reported impressive Q3 earnings and year-over-year (YOY) sales growth. If the House Republicans succeed in cutting means of healthcare, TDOC will have the economic landscape that it needs to skyrocket, making it a clear choice for stocks to buy before 2023.
As Allison Schrager noted in Bloomberg, Republicans aren’t likely to generate the type of change that actually boosts the economy. That means for much of the year ahead, the economy is likely to struggle. While high-growth tech stocks may be facing a difficult road, the stocks that thrive in troubled economies will keep providing steady gains. Walmart (NYSE:WMT) is a company built to thrive when Americans are struggling. The big-box retailer has survived the bullwhip effect that pushed it down during summer of 2022. It is likely to rise before other stocks on this list as the holiday season pushes WMT stock up.
Throughout the past month, Walmart has been an excellent performer, continuing to trend upward through a raging bear market. The company recently delivered impressive Q3 earnings, beating Wall Street expectations for adjusted EPS and revenue. Walmart expects another solid performance for Q4. And with a Republican-controlled House, the stock will continue growing and delivering solid returns. Maintaining the economic status quo will keep WMT on the up and up.
On the date of publication, Samuel O’Brient 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.