NEW YORK, Nov 1 (Reuters) - Tuesday's midterm U.S. congressional elections stand to have broad effects on federal government policies that could ripple through industries from healthcare and tech to gunmakers and prisons.
Investors are bracing for a split Congress, with Democrats taking control of the House of Representatives and Republicans holding their advantage in the Senate, but are mindful that President Donald Trump's victory in 2016 surprised experts.
Taking a majority in even one of the chambers in the Nov. 6 elections would give Democrats a chance to more effectively oppose the Republican president's agenda.
With tech leading the way in the Wall Street rally since Trump's victory, here is a look at policies and stocks the elections should put in focus:
HEALTHCARE POLICY: Perhaps no sector will be in the election spotlight as much as healthcare, which has been one of the top-performing S&P 500 sectors this year.
Policy efforts to lower prescription drug prices that have started under Trump could get more attention should Democrats gain control in Congress.
Democratic gains in particular could lead investors to anticipate expanded coverage or other changes related to the Affordable Care Act, possibly benefiting some insurer company and hospital shares.
Stocks to watch: Merck, AbbVie, Amgen , Mylan, CVS Health, Anthem, Centene, HCA Healthcare, Tenet Healthcare
TRADE: Concerns over trade tensions between the United States and other countries, especially China, have roughed up manufacturers and other companies that depend on international markets, weighing in particular on the industrial sector.
One way the elections could be a factor: Trump's newly forged pact with Canada and Mexico is not expected to be voted on until after the new Congress is seated in January, and there remains a possibility that it will not be approved if Democrats gain control of the House.
"We think headline risk is likely in early 2019 around possible NAFTA withdrawal that will be harmful to industries dependent on open trade across North America," according to Height Capital Markets.
Stocks to watch: Caterpillar, Boeing, Ford , General Motors, Bunge, DowDuPont
INFRASTRUCTURE: A boost in federal infrastructure spending on bridges, roads and other projects is one Trump agenda item seen as an initiative that Democrats potentially could support, should the two sides seek common ground in the event of Democratic gains in Congress, potentially boosting construction and materials stocks.
“The Democrats will have to balance the benefits of a real boost to infrastructure spending and the political risks of giving the president a win on that,” said Christopher Smart, head of macroeconomic and geopolitical research at Barings.
Stocks to watch: Granite Construction, Fluor , Nucor, Martin Marietta Materials
TECH AND TELECOM OVERSIGHT: Scrutiny on Big Tech over antitrust and data privacy issues could pick up with Democrats leading the House, although "we do not foresee this scrutiny translating into actual policy," according to Height Capital Markets.
That could spell more volatility for tech stocks, which have been the best performing sector since Trump's election but have been battered in recent weeks.
"We see the Democratic party no longer as the unconditional defender of the tech sector," Capital Alpha Partners said in a September report.
Height Capital analysts also see "headline risk" for telecom companies from any efforts by the House to address regulations related to equality on the internet, known as "net neutrality," although the analysts see little risk of policy change if the Senate stays Republican.
Stocks to watch: Alphabet, Facebook, Amazon , Twitter, Verizon, AT&T
REGULATION: If Republicans maintain their hold on both chambers of Congress, or perhaps expand their advantage, that could lift investors' hopes for further deregulation of the financial industry and give a boost to stocks.
With Democratic gains, "headline risk for the banking industry would significantly increase as we anticipate numerous congressional hearings," according to analysts at Keefe, Bruyette & Woods.
Stocks to watch: JP Morgan, Wells Fargo, Goldman Sachs
DEFENSE: Spending on national defense is one area that could come into focus for potential federal cuts, especially if Democrats make strong gains.
"A Republican surprise might well be helpful for defense stocks in the near term," said Smart of Barings, adding that the near-term "expectation will be more tax cuts and fewer defense cuts."
Stocks to watch: Lockheed Martin, Raytheon, Northrop Grumman, General Dynamics
IMMIGRATION: Should Republicans hold control of Congress, that could create expectations for harsher federal policies on immigration.
Such policies would also spark expectations for expansion of demand for detention center space, potentially helping to fill prison operators' idle facilities or even generating the need for new ones.
Stocks to watch: CoreCivic, Geo Group
GUN CONTROL: Democratic gains in Congress could pave the way for calls for more stringent legislation to control gun sales. But the prospect of stricter regulations on the firearms industry, paradoxically, could drive up shares of gun-makers.
Investors in the past have bid up shares of gun companies in anticipation of tougher rules, because investors predict gun owners will hurry to buy more firearms if they worry about impending restrictions. Indeed, gun stocks have struggled since Trump's election, a time in which control of Congress and the federal government has been held by Republicans, who are seen as resistant to stricter laws.
Stocks to watch: American Outdoor Brands, Sturm Ruger & Co
Reporting by Lewis Krauskopf in New York Additional reporting by Sinead Carew in New York and Noel Randewich in San Francisco Editing by Leslie Adler