US equities opened higher on 4 November as investors weighed a Democratic sweep of both the Senate and the House against the prospect of gridlock for the rest of Trump’s term. The result can be interpreted mostly as a rebuke of President Trump, rather than a vote in favour of the Democrats’ progressive policies.
Key points
Democrats won both houses of Congress, including Senate seats in Republican strongholds such as South Carolina, Kansas and Texas.
Treasuries and gold rallied and tech stocks sold off overnight, before European markets steadied and US markets opened higher [1].The dollar’s fall against all G10 peers may prove the most durable move.
We read the result as a rejection of President Trump’s policies rather than an endorsement of progressive ones. Centrist Democrats gain ground, and gridlock looks likely for the rest of Trump’s term.
What happened?
As was widely predicted, the US midterm vote of 3 November saw the Democrats take control of both houses of Congress. The results delivered a check on President Trump’s power, with voters citing frustration over the rising cost of living (particularly higher fuel and energy prices), the prolonged war in Iran, and the data-centre build-out. The biggest shocks came not in the swing states but in Republican strongholds: Democrats won Senate seats in South Carolina, Kansas and Texas for the first time in decades.
How did markets react?
As the results picture became clear, Treasuries rallied – the 10-year yield fell about 6bp to just over 4.9% overnight [2] – and tech stocks sold off, before European markets steadied. Investors sought safe-haven assets with the Democratic result seen as putting the brakes on Trump’s fiscal agenda – gold also jumped in the initial reaction.
The dollar weakened against all G10 peers, given its link to the AI trade and expectations that deregulation will slow. This could be the most durable market move from the result.
However, markets stabilised relatively quickly – dip buyers emerged in equities, President Trump signalled willingness to work with Democrats, and concurrent strong results from chipmaker Advanced Micro Devices (AMD) and server maker Super Micro Computer helped offset the initial anti-AI sentiment. Wall Street indices later opened higher in early trading.
There are, however, concerns that a Democratic governor in Texas could disrupt the AI build-out, with the state home to 27% of planned US data-centre projects by gigawatt capacity[3].
Economist's view
“The US midterm election results show a blue wave that is closer to a tsunami than a ripple, as the margins of victory in the most contested states were meaningful, leaving little room for dispute. Trump is going to be the lamest of all the ducks, but the question now is whether the scale of the loss tempers him or provokes him further.
The Democrats have picked up Senate seats in deep-red states – Kansas, Ohio, Iowa, Texas and South Carolina will send centrists to the Senate. This means that Democratic centrists will hold sway over the Democratic Socialists of America (DSA), the influential grassroots socialist and activist group on the party’s left.
Importantly, we see this result as mostly a rejection of Trump’s policies rather than a vote in favour of progressive policies. States with deep agricultural economies turned blue as voters rejected high energy prices and the impact of Immigration and Customs Enforcement (ICE) operations on farm workers. This is also a vote against corruption, a primary concern for voters.
Democrats will have a comfortable majority in the House of Representatives, with Hakeem Jeffries, expected to become Speaker, able to navigate the extremes well. In the Senate, the Democrats will chair the Banking and Judiciary committees. The biggest implication is yet to come as many red states have elected Democratic governors (Georgia, Ohio, Texas, Wisconsin) and the Senate will now tilt blue going into the next presidential election.”
Subitha Subramaniam, Chief Economist
Sector view
"For AI infrastructure, the result is an incremental negative. We expect more state-level rules requiring data centres to supply their own power or support the grid. That raises building costs but does not make data centres uneconomic, and after the recent sell-off, markets look to be fully discounting the political risk.
In defence, funding is the pressure point after Congress rejected the most recent military supplemental, though replenishing munitions stockpiles should be hard to oppose. In healthcare, hospitals and insurers stand to gain if Democrats restore some of the funding that was cut. Pharmaceuticals could face renewed pressure on drug pricing, while biotechnology is better insulated.
Much of this was priced in ahead of the vote. Semiconductors and US aerospace and defence have both lagged global equities over the past three months. It is a reasonable expectation that the certainty of knowing the result could lead to some recovery in market sentiment.”
Tom Kynge, Portfolio Manager – Multi Asset
[1] https://finance.yahoo.com/markets/, 04/11/26
[3] https://www.fastcompany.com/91634444/texas-wanted-to-power-americas-ai-boom-its-new-governor-could-change-everything, 04/11/26
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