What the midterms mean for consumer stocks

Voters in the U.S. go to the polls on Tuesday in an election that could impact consumer stocks, especially those tied to lower-income shoppers.

JPMorgan thinks the election results could shape how much money those shoppers have to spend. If Democrats take control of Congress, "affordability support and targeted fiscal programs" could boost lower-income spending on non-essential goods, advised the analyst team. JPMorgan named Dollar General DG, Walmart WMT, and Ross Stores ROST as possible winners if the Democrats end up with control of both the House of Representatives and the Senate. Meanwhile, a Republican sweep, while positive for some sectors, is considered being negative for companies that sell to lower-income shoppers as even more "affordability pressures persist" due to fiscal policies.

Another major factor for investors to consider with food retailers, consumer staples stocks, and restaurant names would be the incremental support that occurs if a Democratic sweep leads to planned SNAP cuts being delayed and tax credits for lower-income households being backed. A split Congress is seen softening the SNAP cuts, while Congress under a full Republican control is seen leading to the SNAP cuts staying in place.

If the Democrats win full control of the Senate, Seeking Alpha analyst Agar Capital noted the SNAP program and all other forms of assistance are likely to remain intact. That could means that supermarkets, gas stations, and all those businesses that are typically visited by low-income families will likely have a slightly greater degree of stability in their sales. "While I don’t think there would be a significant increase in sales, instead, I think it would simply be another factor to reduce concern about potential instability," he noted. Stocks seen benefiting in this scenario include Kroger KR, Dollar General DG, Dollar Tree DLTR, and Restaurant Brands International QSR.

If Republicans outperform polling and prediction market expectations, some of those same stocks could take a hit since Goldman Sachs' basket of discretionary stocks tied to lower-income shoppers has gained 7% since early October.

Other stocks that analysts have circled as benefiting from Democrats taking back the House or Senate and providing low-income consumer relief include Dollar Tree DLTR, Five Below FIVE, Grocery Outlet GO, Ollie's Bargain Outlet OLLI, Target TGT, TJX Companies TJX, Kohl's KSS, Gap GAP, McDonald's MCD, and Yum! Brands YUM, Wendy's WEN, Home Depot HD, and Lowe's LOW.