Sector ETFs & Stocks To Make The Most Of A Divided Congress

Wall Street has been on one of its best rallies in history post election given the strong bets for a divided government with the likelihood of the Republicans continuing to control the Senate.  Though the Biden-Trump election outcome is not yet finalized with several key states including Pennsylvania and Nevada yet to be called in favor of either candidate, the vote count failed to produce a clear Democratic sweep as was expected.

However, Joe Biden is edging closer to becoming the next president of the United States. According to the latest Associated Press data, former Vice President Joe Biden had 264 electoral votes and President Donald Trump had 214. The Democrat challenger needs just six electoral college votes for victory. Candidates require 270 electoral votes to win the election. [Update: Biden reaches 290, is declared victor.]

A divided government would reduce the chances of major tax increases and tighter regulations, which could crimp corporate profits but also lowered the prospect of a major stimulus package in the near term. The diminished chance of a massive U.S. fiscal stimulus will put pressure on central banks globally to inject further liquidity. These expectations have instilled strong confidence among investors, thereby leading to a strong rally in the stock market (read: Wining & Losing Sector ETFs Post Election Day).  

Notably, the major benchmark is on pace for the biggest weekly gains since April. The Dow Jones and the S&P 500 have risen more than 7% each so far this week while the Nasdaq Composite Index has climbed 9%.

As the market is pricing in Biden as the next President and a divided Congress, where Republicans continue to control the Senate and Democrats the House, most sectors stand to benefit from the scenario. Below we have highlighted a few sectors and one ETF & stock from each of these:

Technology

The divided government will limit the new legislation and dims the prospect of an antitrust breakup of mega-cap tech companies. As such, the technology sector will enjoy huge benefits from this potential outcome.

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Disclosure: Zacks.com contains statements and statistics that have been obtained from sources believed to be reliable but are not guaranteed as to accuracy or completeness. References to any ...

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