Government-sponsored enterprises may be one of the areas to get a lift from a Democratic victory in Congress, says Andrew Laperriere, managing director at ISI Group.
Freddie Mac and Fannie Mae are two entities in particular that stand to benefit, he says, even though they are still struggling to recover from their recent accounting woes.
"A Democratic Congress could lift the political cloud hanging over the GSEs and allow for significant expansion of their PE ratios," he wrote in a recent research note.
At the same time, a Democratic Congress may be bad for mortgage lenders, warns Laperriere.
If the housing sector worsens, companies that offer sub-prime and non-traditional loans such as New Century Financial Corp. and Countrywide Financial Corp. could face greater scrutiny by Democrats.