With September almost over, the 2022 midterm elections are less than two months away. Historically, markets suffer in the months leading up to the midterms. And, while they often rebound in the months that follow, experts have indicated this time may be different. With this in mind, investors are keeping an eye out for stocks to buy if the Republicans take control of the House of Representatives.
This year has been marked by unprecedented macroeconomic headwinds, from the pandemic to skyrocketing inflation. Accordingly, markets may not be so quick to rise after the elections. As the markets are reeling from yet another Federal Reserve rate hike, investors should closely consider what stocks are best in this uncertain economic landscape. However, which stocks to buy largely depends on the results of the election.
Democrats are favored to retain control of the Senate but lose the House in a sweeping Republican victory. According to FiveThirtyEight, the GOP will likely end up holding anywhere from 214 or 246 seats out of 435 in total. That will mean severe partisan gridlock for the next two years. President Joe Biden and his administration have prioritized investing in sectors like alternative energy and infrastructure, but if current predictions are correct, a Republican House could yield significant benefits for other sectors.
Dr. Ryan Lemand, Non-Executive Director at leading third-party UCITS Management Company FundRock, spoke to InvestorPlace about this topic. “Non-cyclical companies should hold up better than cyclical ones,” Lemand notes. “However, it is expected that all companies drop in price.”
Some non-cynical stocks like consumer staples certainly stand to benefit from a Republican victory. But other experts say companies dealing in luxury goods may also win on the news.
With that said, here are some of the top stocks to buy if Republicans take the House:
Exxon Mobil (XOM)
The fossil fuel industry may be the biggest winner of the 2022 midterms. While alternative energy stocks have seen a significant boost under Democrat leadership, partisan gridlock will make it hard to keep investing in the sector.
This will mean a turnaround for oil producers. As Wedbush Securities Managing Director Steve Massocca notes, oil companies are “already benefiting from a dearth of energy.” Accordingly, the oil industry “will be perceived to benefit from a Republican victory.”
Exxon Mobil (NYSE:XOM) is at the top of the fossil fuel sector, so it especially stands to gain. The oil giant has performed well even while its sector battles a difficult year. The company boasts some impressive growth in both sales and earnings. InvestorPlace contributor Josh Enomoto also notes that Exxon does an excellent job of covering the “core bases of the oil and gas industry” in both its upstream and downstream portfolio. That likely makes it one of the best-positioned stocks to buy if the market shifts in favor of fossil fuels after the midterms.
Chevron (NYSE:CVX) is used to playing second fiddle to Exxon, but it still boasts one of the largest market capitalizations among publicly traded energy companies. CVX stock also recently received a positive endorsement; Warren Buffett has been loading up on shares. As of last week, CVX is one of Berkshire Hathaway’s (NYSE:BRK-A, NYSE:BRK-B) top holdings.
While CVX has struggled throughout 2022, there’s plenty of reason to expect a turnaround. Even if the fossil fuel sector doesn’t see a bump from midterms, shares should still be counted among stocks to buy. As InvestorPlace contributor Muslim Farooque reports: “Chevron’s positioning as a leading up and downstream player helps ensure outsized profits.”
Although McDonald’s (NYSE:MCD) isn’t a consumer staples company, it always seems to move in solidarity with them. What’s more, consumer staples stocks tend to rise during times of economic uncertainty, when consumers feel the need to prepare for the worst.
According to InvestorPlace contributor Josh Enomoto, MCD stock may rise on a “cheap thrills thesis.” Of course, McDonald’s is a cheap way to eat out; one nutritionist also says its famous fries cause a release of dopamine. However, MCD stock has more going for it than French fries and a questionable economic landscape.
McDonald’s has been known to lobby against minimum wage increases, something that Republican lawmakers have also fought against. In Feb. 2021, they worked hard to block Biden’s proposed increase. So, a Republican House will make it even more difficult for that type of bill to be passed, likely leading to a more profitable year for McDonald’s.
They may operate in different sectors, but Walmart (NYSE:WMT) and McDonald’s do have some important things in common. For one, both are household names that lower-income Americans have trusted for decades. Both companies have also spent considerable time and resources fighting against federal minimum wage increases. That means WMT stock will likely rise alongside MCD stock if Republicans take back the House.
Even before the predicted Republican victory, experts hailed WMT as a stock to buy to protect against present economic concerns. InvestorPlace contributor Chris MacDonald recently included both WMT and MCD in a list of safe dividend stocks. As MacDonald notes, Walmart has increased its dividend for nearly 50 years.
LVMH Moët Hennessy Louis Vuitton (LVMHF)
Walmart isn’t the only retailer that stands to benefit from a Republican House; high-end retailers may also win from a GOP takeover. This may seem like a contradiction, but both ends of the sector actually stand to benefit from a Republican victory.
Republicans aren’t likely to support a federal minimum wage increase. They’re also just as likely to block any proposed taxes on capital gains. In fact, the GOP has spent years fighting a long war on capital gains taxes. If this trend continues, luxury goods companies like LVMH Moët Hennessy Louis Vuitton (OTCMKTS:LVMHF) will have something to celebrate.
LVMH Moët Hennessy Louis Vuitton encompasses several luxury brands. Louis Vuitton produces some of the most expensive products in modern fashion. Meanwhile, Moët Hennessy has successfully cornered the market on multiple top-shelf alcohol brands. If there’s a stock to buy that benefits from consumers with excess spending money, it’s LVMH stock.
Interactive Brokers (IBKR)
Interactive Brokers (NASDAQ:IBKR) stock doesn’t get much attention from the retail investing crowd. That may be because it caters to investors who trade at much higher levels. Why is that important? Because, as InvestorPlace contributor David Moadel argued last year, “there will always be a market for seasoned traders.”
Essentially, IBKR stock belongs in the same group as LVMH. While shares may not receive as much coverage as flashier competitors like Robinhood (NASDAQ:HOOD), Interactive Brokers caters to more economically advantaged consumers. A lack of a capital gains tax will only help IBKR rise as successful investors are left with even more money to pour back into the market. Additionally, shifts in market momentum can often lead to renewed investor investment. That will mean another positive growth catalyst for IBKR stock, regardless of how the market responds to midterms.
Lockheed Martin (LMT)
Defense stocks aren’t often among the winners during a Democratic administration, but since Russia’s invasion of Ukraine, companies in the aerospace and defense technology space have seen a significant spike in demand. Lockheed Martin (NYSE:LMT) is one of the sector’s biggest names, with holdings in aerospace engineering and arms and defense technology production as well as an established global presence.
Lockheed and its peers have struggled recently amid cooling market conditions. However, a Republican House victory would likely shift market sentiment back in Lockheed’s favor, making LMT one of the top stocks to buy. After all, Republicans have a long history of calling for increases in defense spending. Plus, President Biden recently said the U.S. would defend Taiwan “in the event of a Chinese invasion.” That only bolsters the case for defense plays like LMT stock.
On the date of publication, Samuel O’Brient did not hold (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.