Sector ETFs to Watch Ahead of the U.S. Midterm Elections

what happened

According to Baystreet.ca, stock markets have started pricing in the outcome of the closely contested House and Senate races. Polls suggested the midterms would favor Democrats, yet ETFs have not fully reflected that view.

The energy sector (XLE) closed last week at a new high near $70.00. Oil kept climbing, with Brent reaching a six-month high on Thursday, and over the weekend Washington signaled a higher chance of further strikes on Iran. The outlet argues that a Republican defeat could push XLE lower, while markets would then price in better odds that Iran allows more shipments through the Strait of Hormuz.

The biotech ETF XBI slipped below $150 after its summer highs. Republicans usually benefit the group, since Democrats more often add rules that slow drug development. The consumer discretionary ETF (XLY) is trending lower, although it recently bounced; investors moved out of technology (XLK) and into these shares. The communications ETF XLC is seen as neutral on the midterms, while Verizon (VZ) is under pressure from SpaceX's (SPCX) entry into landline telecom. Alphabet and Meta Platforms, the outlet says, could outperform the market regardless of the vote.

why it matters

The key question for investors is how the election result would affect oil and expectations for drug regulation and consumer spending. Baystreet.ca suggests a GOP win could weigh on XLY, since markets would expect energy prices to stay high, keeping pressure on household budgets.

market impact

Energy and consumer ETFs: the election outcome shifts expectations for oil prices and household spending

tags

instruments