"It's likely that Democrats will tread carefully over the next two years because, in the run-up to '08, they certainly don't want to be blamed for any economic slowdown.
Analysts pretty much agree on what sectors will win or lose with Democrats in control of the legislative branch. Pharmaceutical companies are high on the list of losers, since Congress may seek price concessions for drugs used in government programs like Medicaid. Merck's shares (MRK) fell 7.2% from the close of Tuesday's trading through Friday morning; Pfizer (PFE) was down 6.6%; Johnson & Johnson (JNJ) was off 4.6%. (To see how the hit to pharma stocks may present buying opportunities, see The Trader.) Restaurants, meanwhile, will be squeezed by legislation raising the minimum wage.
Oil companies will be hurt by the elimination of tax benefits or the imposition of a windfall-profit tax. Defense outfits could be wounded by a pullback in Iraq. On the other hand, alternative-energy producers might benefit from legislation to reduce U.S. oil dependency and to cut greenhouse-gas emissions; property and casualty insurers could benefit from an extension of the Terrorism Risk Insurance Act, which Democrats generally support; and mortgage lenders Fannie Mae (FNM)and Freddie Mac (FRE) could get regulatory relief.
As for a tax hike, forget about it. The lame-duck-in-chief in the White House wouldn't approve, and the Democrats' majority is too slight to override George W's veto."
