What does the US midterm election mean for investors?

In a historically significant US midterm election, Democrats secured control of both the House and the Senate[1]. Their victory, which saw them flip at least seven Senate seats, including three in states held by Republicans for decades, is a clear rebuke to Trump’s policy[2]. The overall direction of US economic policy is unlikely to change significantly, however, as Trump retains the power to veto legislation passed by Congress and substantial authority over trade and foreign policy.

Limited economic impact but political confrontation

On fiscal policy, Trump already secured passage of his “One Big Beautiful Bill” in 2025, and its core provisions will remain in place. With control of Congress, Democrats could seek to soften cuts to Medicaid and SNAP, using negotiations over defence spending, federal funding, and future increases in the debt ceiling to extract concessions. Their ability to force legislative changes remains limited, however, as overriding a presidential veto requires a two-thirds majority in each chamber.

Regulation remains a key issue for banks, artificial intelligence, energy, and environmental standards. The administration can continue to ease regulatory requirements through executive action and federal agencies, subject to judicial review and heightened congressional scrutiny. For data centres, the main risks remain at the state and local levels, particularly those related to grid connections, electricity rates, permitting, and taxation. 

The election’s most significant consequences are likely to be institutional and political. By taking control of the House, Democrats can strengthen oversight of the administration by chairing House committees, holding hearings, and launching investigations into policy decisions and public spending. They can also initiate impeachment proceedings by a simple majority vote. Removal from office of Trump, however, remains highly unlikely, as conviction requires the support of two-thirds of senators present. Democratic control of the Senate gives them the power to block Trump’s nominees, including federal judges and, should any vacancies arise, Supreme Court justices or members of the Board of Governors of the Federal Reserve (Fed).

Ahead of the new Congress taking office in January, Trump could adopt a more interventionist approach and continue seeking ways to assert executive authority.