US midterm elections will determine control of the House of Representatives and one-third of the Senate. All 435 House seats are up for election, along with 33 regular Senate seats. At present, Republicans control both chambers: the House stands at 220 Republicans to 215 Democrats, while the Senate stands at 53 Republicans, 45 Democrats, and 2 independents who caucus with Democrats. The chamber most likely to flip is the House, given the narrow margin, while the Senate is harder to change because only one-third of seats are contested at a time.
Key Takeaways
- We believe the most likely outcome is a split Congress, with Democrats taking the House and Republicans keeping the Senate, which should preserve broad policy continuity and limit the scope for major fiscal or legislative change. A Democratic sweep is also very likely. This would raise the risk of a more interventionist agenda, although still constrained by the budget deficit, while a Republican hold of both chambers is very unlikely.
- Markets increasingly price a Democratic sweep, but policy risks remain. A Democratic House is largely priced in, while the Senate remains the key uncertainty. A Republican rebound or more aggressive use of executive powers could still surprise markets.
- The midterms could reshape sector performance. Continued AI investment should support IT, with industrials and materials potentially benefitting as capex broadens. The impact on energy could be mixed, as higher energy prices remain supportive, while less opposition to renewable energy could make renewables more competitive.
You can now read the full whitepaper at the link below
