Wall St expects Republican mid-term win

Investors are betting that Republicans retake the Senate in November.

NEW YORK (CNNMoney)

"Markets expect Republicans to retake Senate control," asserted Fred Dickson, chief investment strategist at D.A. Davidson & Company. He said that if that doesn't happen, stocks could experience a short-term correction in the days following the election.

The notion that the stock market is already pricing in a Republican victory probably has less to do with investors' savvy political insight and more to do with the latest polling data, which suggests that the Senate math is becoming increasingly dire for Democrats.

Which companies could come out on top? A few sectors stand to benefit directly from the GOP controlling Congress, according to Greg Valliere, Chief Political Strategist for The Potomac Research Group, a firm that provides political analysis for investors.

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He claims that the biggest election pure play is medical device makers, which are currently subject to a 2.3% tax to help fund Obamacare. Republicans have vowed to repeal the tax, a move that even some Democrats are on board with.

Defense stocks could also get a boost from a Republican Senate triumph, Valliere believes, because Republicans are generally more willing to allocate greater funds to the military and roll back any forced spending cuts hurting the defense budget.

In terms of the broader market, Valliere alleges that there's a real chance of corporate tax reform with Republicans dominating Congress, something that Wall Street would undoubtedly cheer.

An Internal Revenue Service holiday that would allow U.S. companies to bring back some of the cash they have parked overseas would be a real boon to the market, Valliere said. He cautioned that an overhaul in the individual tax code is probably unlikely.

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Wall St expects Republican mid-term win