US midterm polls: 2 stocks to watch as Republicans take House

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Highlights:

  • The Grand Old Party attained a narrow majority in the House.
  • Republicans might hinder the Democratic threat of imposing a windfall tax on the oil producers.
  • Pfizer, Inc. (NYSE: PFE) diluted EPS rose six per cent YoY in Q3 FY22.

The Republicans gained a majority victory in the House of Representatives on Wednesday after an intense fight between the two parties for more than a week. Although the margin was narrow, decreasing the past anticipations over a red wave, they would now have the power to interrupt US President Joe Biden's agenda.

Over a week after the election, the GOP had reportedly gained control over the House with the minimum 218 seats required for the majority to control the chamber. However, the investors were also anticipating a split government, which generally tends to benefit the stock markets.

Given the uncertainties in the market in recent months, investors seem to be optimistic about the midterm elections. Historically it is seen that the market performs better after the period of midterm polls.

Now, as the GOP's winning might halt some of President Biden's agendas, the investors are looking for sectors or stocks that might be benefited from the current result. Let's look at two stocks each from the energy and healthcare segment.

Today, we would be exploring Exxon Mobil Corporation (NYSE: XOM) and Pfizer, Inc. (NYSE: PFE), and see their recent stock and financial performance.

Exxon Mobil Corporation (NYSE: XOM)

The stocks of the major oil and gas industry firm, Exxon Mobil Corporation, closed at over one per cent down on Wednesday, November 16. The leading investor-owned oil firm's dividend yield is 3.19 per cent.

The US$ 462.48 billion market cap energy company has benefited through the year due to the higher energy prices bumped up due to the Russia-Ukraine war. Meanwhile, the Republican's victory will likely cause no major shift in the energy policy.

Meanwhile, the recent threat from the democrats to impose a windfall tax on oil producers could be hindered by the Republicans, which could be a positive event for the energy firms. However, this does not necessarily mean that investors should explore this stock. It is important to analyze all the pros and cons of a particular stock.

Exxon Mobil Corporation's net income was US$ 19.66 billion on revenue of US$ 112.07 billion in the latest quarter. In the year-ago period, the energy firm's net income totaled US$ 6.75 billion on revenue of US$ 73.78 billion.

Pfizer, Inc. (NYSE: PFE)

The leading multinational healthcare company, Pfizer Inc's dividend yield was 3.29 per cent. Meanwhile, under the Inflation Reduction Act or IRA, the democrats aimed to lower drug costs for Americans.

Although not all high-priced drugs would be under consideration, certain key drugs for cancer and other serious diseases could be lowered as soon as 2026 under the Act. While the Republicans won't be able to revoke the IRA, they would likely try to slow down the execution of the bill.

In Q3 FY22, Pfizer Inc's revenue slumped six per cent YoY to US$ 22.63 billion, and its reported diluted EPS rose six per cent YoY to US$ 1.51 apiece in the quarter.

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Bottom line:

The split government often results in a political gridlock, which is likely to be a positive event for the market.

Although the GOP victory over the House could bring obstacles to President Joe Biden's agendas, he would still have the veto power during his presidential term. In the coming days, Mr Biden could still rely on executive action to move with his prioritized agendas.

However, as the policy rates are at a higher level and the inflationary pressure, although cooled, prevails, investors should carefully tread with their investment plans.



 


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