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.
Key takeaways
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Fiscal policy implications should be limited as President Donald Trump retains veto power, but the risk of a political confrontation has increased.
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For technology, the regulatory risk sits mainly at state and local level. Demand and earnings remain strong.
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Our asset allocation is unchanged. We stay positive on equities and see safe sovereign bonds as a more efficient hedge. A broader rally will also depend on de-escalation in Iran and lower energy prices.
A test for 2028
Politically, the election leaves the future direction of both parties uncertain. The Republican defeat could weaken Trump’s political authority within the party, and some Republican elected officials might begin to distance themselves from him with an eye to 2028. Democrats, meanwhile, will need to manage their own internal divisions ahead of the 2028 elections, as their stunning victory reflects a forceful repudiation of Trump’s policies more than an endorsement of their agenda.
Asset Allocation unchanged
We remain positive on equities after the midterms. The Democratic sweep changes the political balance more than the economic outlook, and we see the regulatory risk for technology as manageable for now. With the election behind us, markets can refocus on fundamentals. The recent correction gives us room to rebuild our exposure to AI. The upcoming Anthropic IPO will be an important test of that move. Government bonds are once again working as a hedge, and a Democratic Senate able to block Fed nominations lowers the risk to central bank independence. Our equity exposure should become more broad-based if the Iran conflict de-escalates and energy prices and interest rates ease.
Technology remains a conviction
Some Democratic candidates have called for tighter restrictions on data centre development, including statewide moratoria.
Hyperscalers could face federal policy headwinds, but Trump still has veto power. Policy risks may be more pronounced at the state and municipal levels, where support for moratoria on new construction is growing. Nevertheless, we view the likelihood of widespread implementation as low as broader cost-of-living concerns are likely to take priority. Companies may also mitigate local restrictions by shifting development to other states.
With the US midterm elections behind us, attention can now return to fundamentals.
Despite concerns about elevated capital spending and negative free cash flow, demand remains robust, and IT earnings grew by more than 25%[3], again ahead of expectations. Following the recent share-price declines and some unwinding of crowded positions, we continue to see compelling opportunities in the technology sector.
Ultimi approfondimenti
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In a historically significant US midterm election, Democrats secured control of both the House and the Senate . -
Gli utili al centro dell'attenzione
La Fed ha alzato i tassi quando, solo pochi mesi fa, gli investitori si aspettavano tagli. Ora i mercati prevedono ulteriori strette fino al 2027, eppure le azioni statunitensi sono ancora in rialzo quest'anno. Le aspettative sugli utili hanno retto nonostante il cambiamento delle attese sulla politica monetaria. L'imminente stagione degli utili per il T3 dirà se le società saranno in grado di soddisfare tali aspettative. . -
Finora, tutto bene
La solida crescita offre alle banche centrali maggiori margini per adottare un approccio restrittivo. -
Mantenere la calma e andare avanti
Il ciclo globale sta ancora riprendendo fiato. Il PMI mondiale è salito solo marginalmente a giugno, restando coerente con una crescita istantanea vicina al 2,5% nel T2, in calo rispetto a poco più del 3% prima della guerra con l’Iran. -
Scarsità, rivalità e la nuova logica di asset allocation
Il passaggio da un mondo “soft” a uno “hard” rappresenta un cambiamento di regime duraturo, determinato dalla rivalità geopolitica, dalla competizione nel campo dell’intelligenza artificiale e dalla scarsità strutturale delle risorse. -
Una domanda insaziabile
La crescita sta rallentando. I consumatori stanno diventando più selettivi. Eppure, la domanda di asset strategici continua ad accelerare. -
Hormuz, we have a problem. Do we?
I mercati obbligazionari stanno scontando la guerra in Iran. Quelli azionari, no. Questa divergenza è diventata uno dei tratti distintivi dell’ultimo mese. Il conflitto ha ormai superato la fase dello shock iniziale ed è entrato in una dinamica fatta di escalation ricorrenti, parziali allentamenti delle tensioni e persistenti fattori di discontinuità. -
Escalation. De-escalation. Il ciclo si ripete.
I mercati finanziari sono entrati in un periodo in cui escalation e de-escalation non sono più eventi isolati, ma parte di uno schema ricorrente. La guerra in Iran non ha seguito un andamento lineare; ha conosciuto fasi altalenanti, con periodi di intensità seguiti da pause temporanee, ciascuna delle quali ha contribuito a una rinnovata incertezza piuttosto che a una risoluzione.