Editor's note: This column by Doug Kass is a special bonus for RealMoney readers. It first appeared on Street Insight on Nov. 8 at 8:17 a.m. To sign up for Street Insight , where you can read Kass' commentary in real time, please click here .

There's a new sheriff in Washington, D.C., and with it, there will be a reverberation in our economy and capital markets.

Control of the Senate remains statistically in doubt, as Democrats are leading close races in Montana and Virginia. In terms of the House, the Democrats are in control, gaining 33 net seats.

The election referendums on Iraq and the economy were clear, as poor management of the war and the general view that the lower- and middle-income classes have suffered at the expense of big business struck a populist chord with the electorate.

Given the sheer force and momentum of the bull market, even a Democratic "tsunami" will not immediately lead to a substantial market correction. While I believe the election's outcome will have a negative impact on equities over the short term (and that we have likely seen the market's highs for the year), we will probably see a slow and steady drip in equity prices through the remainder of the year, not a sudden, precipitous drop over the immediate few days and weeks.

In Monday's column , I highlighted the most vulnerable market sectors:

  • Defense ( PowerShares Aerospace & Defense ( PPA))

  • Pharma ( Pharmaceutical HOLDRs ( PPH))

  • High-end retail ( Retail HOLDRs ( RTH))

  • Energy ( Oil Services HOLDRs ( OIH))

I also outlined the sectors that will most benefit from the changing of the guard:

  • Environmental ( Johnson Controls ( JCI), Clean Harbors ( CLHB), Medis Technologies ( MDTL) and PowerShares WilderHill Clean Energy ( PBW))

  • Government-sponsored agencies ( Freddie Mac ( FRE), SLM ( SLM) and Fannie Mae ( FNM))

Importantly, a move toward protectionism and against trade agreements will also be unsettling to the markets.

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