#美国中期选举进入最后冲刺 #每周来晒 How Will the U.S. Midterm Elections Affect Financial Markets?

For financial markets, the election results will influence investors’ views on U.S. fiscal policy, the regulatory environment, the development of the AI industry, and the path of interest rates.
The U.S. midterm elections will be held on November 3, with all 435 seats in the House of Representatives and 35 of the Senate’s 100 seats up for election. The election is not only about control of both chambers of Congress; it will also test the Trump administration’s record after nearly two years in office and determine its room to maneuver for the rest of its term.
The high cost of living, the impact of artificial intelligence (AI) on the job market, and diplomatic and security disputes arising from the U.S. conflict with Iran are becoming key issues shaping voter sentiment. Meanwhile, whether Democrats can regain control of Congress has become a focus for pollsters and prediction markets. The midterms matter for more than shifts in the balance of seats between the two parties. Changes in the balance of power in Congress will directly affect the White House’s ability to advance legislation and could also alter how the Trump administration pursues policy on fiscal matters, regulation, trade, and foreign affairs. Even if the election results do not immediately reverse the current direction of U.S. policy, a divided Congress or one party’s control of both chambers could constrain Trump’s ability to govern to varying degrees for the rest of his term.
For financial markets, the election results will influence investors’ views on U.S. fiscal policy, the regulatory environment, the development of the AI industry, and the path of interest rates. Markets may react differently under three possible scenarios: Republicans retain control of both chambers, power is divided between the parties, or Democrats win both chambers.

Outcome 1: Divided Government, Policy Gridlock Could Benefit Markets
Based on the current state of the race, Democrats are poised to retake the House, but the Senate contest remains highly uncertain. House members serve two-year terms. The chamber currently has 219 Republican members and 214 Democratic members, with two seats vacant. Pollsters and prediction markets generally believe Democrats are likely to win the House relatively easily. By contrast, the Senate race is much closer. The Senate currently has 53 Republican members, 45 Democratic members, and two independents who typically vote with Democrats. Democrats need to win at least four of the 22 Republican seats up for election while holding the 13 seats of their own that are up for election to regain control of the Senate.
If Democrats retake only the House while Republicans retain control of the Senate, Congress will be divided between the two parties.
For Wall Street, this kind of policy gridlock may not be a bad thing. With the House and Senate controlled by different parties, and Trump holding presidential veto power, any major legislation will face significant obstacles. Issues such as government spending and tax policy could also stall.
Stuart Kaiser, head of U.S. equity trading strategy at Citigroup, believes that, given the current strength of corporate earnings and economic growth, policy gridlock in Congress would be the best outcome for stocks. This would allow companies and investors to focus more on corporate earnings and economic fundamentals without having to worry as much about shifts in policy direction.
U.S. corporate profits have surged this year, while gross domestic product (GDP) has continued to grow steadily. Historical data also show that policy gridlock tends to benefit stocks. Data compiled by Carson Investment Research show that since 1950, with a Republican president and a divided Congress, U.S. stocks have gained an average of 13.7% a year; by comparison, the average annual gains have been 8.3% and 4.9%, respectively, when Republicans or Democrats have held full control of Congress. A divided Congress could also support the bond market. The logic is that policy gridlock would limit the government’s ability to introduce further fiscal stimulus, such as tax cuts, helping contain the expansion of the fiscal deficit and ease pressure from bond supply. Meanwhile, lower borrowing costs could benefit industries such as manufacturing, which are more sensitive to financing costs. However, even if Democrats cannot control the Senate, they would still constrain Trump’s legislative agenda for the remainder of his term. Data center construction and the development of the AI industry are particularly likely to become new flashpoints between the parties. Some Democratic lawmakers may use the political advantage gained from winning the House to push for restrictions on data center construction in their districts and call on Congress to increase scrutiny of tech companies and AI development, applying pressure through hearings and other means. Fossil fuel producers could face similar regulatory challenges. The greater uncertainty is whether a constrained Trump will rely more heavily on presidential executive powers to pursue his agenda, and whether he would accept greater market volatility to achieve his political goals.
With congressional legislation blocked, Trump’s scope to act will be more concentrated in areas under presidential authority, including foreign and trade policy, national security and defense, law enforcement and regulation, appointments, and administration. This means Iran, as well as tariff and trade policy, could become priorities for the remainder of his term. However, Democrats may also use their congressional oversight powers to try to constrain his actions. The state of U.S. government finances remains a risk markets cannot ignore. By mid-2027, the U.S. may again face a debt ceiling issue, with little room for compromise between the two parties in Congress. This could prolong a government shutdown even further, potentially exceeding the scale of last October’s shutdown. The previous shutdown reduced fourth-quarter 2025 GDP growth by a full 1 percentage point. If a U.S. government shutdown interrupts the collection and release of economic data, the Federal Reserve could once again find itself without key economic data, making monetary policy decisions more difficult.
In addition, Democrats could use their control of the House to launch a new round of impeachment investigations. The impeachment process begins in the House, but a conviction requires the support of at least two-thirds of the Senate, or 67 senators. Given that the number of Democratic lawmakers and Republicans who might support impeachment is unlikely to reach this threshold, a conviction is unlikely. Nevertheless, impeachment could still serve as a political tool for Democrats to constrain Trump and further intensify political divisions in the U.S. Another possibility is that Democrats shift their investigations toward members of Trump’s Cabinet rather than targeting the president directly.

From the financial markets’ perspective, this scenario is broadly in line with current market expectations. Although Democrats would regain some power in the House, they would still lack the ability to push through substantive policy changes. Policy continuity would remain strong, while the bond market would have to balance persistently high fiscal deficits against the possibility of easing inflationary pressure.
Against this backdrop, yields on short-term U.S. Treasuries could gradually decline, while long-term Treasury yields would retain an upward bias, but are expected to remain broadly within the 5.25% to 5.5% range.
As for the dollar, markets have largely priced in the possibility of a divided Congress. This outcome may not be enough to shift the market’s focus away from high inflation or alter expectations that the Federal Reserve will raise rates at least one more time. However, if a government shutdown lasts too long, its negative effects could emerge gradually in the second half of 2027 and weigh on the dollar.
Outcome 2: Democrats Sweep, AI Regulatory Risks Rise, Healthcare Companies Could Benefit If Democrats win control of both the House and the Senate, it would mean stronger checks on the Trump administration in Congress. Given current polling trends and Trump’s low personal approval ratings, prediction markets consider this one of the more likely scenarios. In foreign policy, Democrats may feel more confident opposing Trump’s position on Iran, his support for Israel, and plans to further expand tariffs. Democrats may also pressure Trump to take a tougher stance toward Russia and continue supporting Ukraine. On domestic policy, Democrats are expected to try to advance legislation expanding access to healthcare and could use this as a bargaining chip to accept, to some extent, Trump’s calls for increased defense spending.
However, if Democrats control both chambers of Congress, they could bear more of the political responsibility for a government shutdown, which could damage their image. At the same time, the U.S. fiscal deficit and debt sustainability will remain long-term risks that markets cannot ignore.

The political impact could also extend to the parties’ future strategies.
If Republicans suffer major losses in congressional elections, the party may reassess its future direction. As Trump’s political influence gradually wanes, prominent Republicans such as Vice President JD Vance and Secretary of State Marco Rubio may begin consolidating their political support in preparation for the 2028 presidential election.
$INTC Democrats will also face choices over the party’s direction. A landslide victory could intensify internal debate over the party’s 2028 presidential nominee: should it put forward a candidate closer to the traditional establishment, or should left-wing forces use the election momentum to seek leadership?
For financial markets, the impact of a Democratic sweep would not simply be a shift in the balance of power in Congress. More importantly, it could change market expectations for the Trump administration’s economic policies, especially the outlook for the AI industry. AI regulation could become a major risk for stocks. If Democrats control both chambers of Congress, they may push more aggressively for stronger AI regulation, including restrictions on data center construction and stricter rules governing the development and use of AI models. Any policy that could slow the expansion of the AI industry could affect the flow of capital to chipmakers and industrial companies that supply equipment and services to data centers. It could also weaken expectations that tech companies will generate substantial profits by selling AI products and services.
This would pose a potential headwind for U.S. stocks, which currently rely heavily on growth in AI investment and earnings expectations. Investors may consequently reassess the valuations of related companies and take profits in AI-linked stocks. However, even if Democrats gain control of both chambers, passing AI-related legislation would not be easy. Trump has consistently positioned himself as a supporter of AI industry development and would likely veto any overly restrictive bills, while Democrats are highly unlikely to secure the two-thirds congressional majority needed to override a presidential veto. This means that although a Democratic sweep could signal a policy shift toward stronger AI regulation, it may not quickly translate into substantive legislative constraints. The near-term direct impact on the earnings outlook for AI leaders such as Microsoft and Nvidia may be relatively limited. Rather than legislation, Democrats are more likely to put pressure on AI companies through congressional investigations and public hearings, scrutinizing data center construction, AI applications, and corporate business practices. Even if these measures do not immediately change the industry’s fundamental trajectory, they could affect investors’ views of the future regulatory environment. A Democratic sweep may be seen as a signal that U.S. AI regulation will tighten, especially as markets begin to assess policy after Trump leaves office.
At the sector level, healthcare companies could be potential beneficiaries. If Democrats push to reverse previous cuts to Medicaid, related healthcare providers could benefit. By contrast, defense contractors could come under pressure. Their share prices have already fallen amid market concerns that Democrats will increase scrutiny of the defense budget.
The reaction in bond and foreign exchange markets will depend on the interplay between congressional checks and Trump’s executive powers. On the one hand, Democratic control of Congress could limit Trump’s ability to advance policies through legislation. On the other hand, if Trump relies more heavily on executive powers later in his term—for example, by imposing further tariffs or taking steps that could heighten geopolitical tensions—concerns about inflation and policy uncertainty could still push long-term Treasury yields higher. Short-term yields could face upward pressure as they are affected by monetary policy expectations and changes in congressional policy. The 10-year U.S. Treasury yield could approach 5.5%, but is relatively unlikely to break above that level.
The dollar could face some depreciation pressure. On the one hand, a Democratic sweep could prompt markets to reassess the continuity of policies such as deregulation in the U.S. and large-scale investment in AI infrastructure. On the other hand, if investors believe slower development of the AI industry will weaken the U.S. growth outlook, the dollar could also come under pressure. However, high energy prices and expectations of Federal Reserve rate hikes could still support the dollar. As a result, this election outcome is not expected to have a material impact on the global foreign exchange market, where daily trading volume is around $9.5 trillion.

Outcome 3: Republicans Hold Both Chambers, AI Stocks Extend Gains, Fiscal Risks Push Treasury Yields Higher
Based on current polls, Republicans retaining control of both the House and Senate is the least likely of the three scenarios. But if it does happen, Trump would likely regard it as voters’ endorsement of his “America First” strategy. With no need to consider reelection, Trump may focus more on shaping his political legacy during the final two years of his presidency and cementing the signature achievements of his administration.
On immigration and trade, U.S. border controls are expected to tighten further, and deportations could expand. Tariffs could be used more often as tools of foreign and economic policy to encourage foreign governments to align with the U.S. position on international affairs. Trump may also continue to demand that NATO members increase defense spending, and take tougher economic and military action on Iran, calling on other countries to participate.
On domestic economic policy, deregulation is expected to be a priority. Accelerating AI and tech innovation, encouraging manufacturing to return to the U.S., and expanding energy production—especially fossil fuel and nuclear energy development—could all be important levers Republicans use to drive economic growth. This policy mix could sustain a market environment favorable to the AI industry and related infrastructure investment. However, the fiscal cost of this policy expansion could become a new concern for markets. If tax cuts, industrial subsidies, and an expanding defense budget further boost government spending, concerns about the U.S. fiscal deficit and debt sustainability will intensify, and markets may grow more worried about Treasury supply and fiscal risks.
Geopolitical developments could further amplify inflation risks. If U.S. military operations in the Middle East escalate, energy supplies could be severely disrupted, pushing up oil and other energy prices. Meanwhile, if Trump pushes through his so-called “Trump dividend” plan to provide cash payments to eligible Americans, it could further stimulate demand and add to inflationary pressure. In this situation, the Federal Reserve could face greater policy pressure, and market expectations of rate hikes would rise, further intensifying concerns that the U.S. economy could shift from boom to recession.
The bond market could be one of the areas under the greatest pressure in this scenario. An expanding fiscal deficit, rising energy prices, and expectations of tighter monetary policy would collectively push the entire U.S. Treasury yield curve higher.
Specifically, short-term yields would reflect rising risks of Federal Reserve rate hikes, while long-term yields could be driven higher by the combined effects of a growing fiscal deficit, increased Treasury supply, and rising inflation expectations. The 10-year U.S. Treasury yield could break above 5.5% and remain above that level for a time; the 2-year Treasury yield could also rise and stabilize around 5%. Of course, another possibility is that Republicans treat their election victory as a political mandate to put the country’s finances in order and take steps to contain the deficit, in which case Treasury yields could eventually fall again. Before that happens, however, markets may need to go through a relatively sharp adjustment to prompt Republicans to take genuine fiscal consolidation measures.
From a currency perspective, the combination of further fiscal easing and tighter monetary policy would make this the most dollar-positive of the three election outcomes. Rising U.S. Treasury yields could continue to put pressure on the global financial system, putting emerging market currencies at greater risk of depreciation and potentially affecting the euro as well, particularly if volatility in the French government bond market becomes a channel for risk transmission.
For stocks, a Republican sweep could extend the current policy environment favorable to AI stocks: if Republicans retain control of both chambers, markets may expect the Trump administration to further ease regulation, support tech innovation, and expand infrastructure investment, providing policy backing for the AI industry. Matt Miskin, a strategist at Manulife John Hancock Investments, said, “The status quo itself is not a bad thing.” Financial and industrial stocks could also benefit. Investors may bet that Republicans will boost the U.S. economy through measures such as tax cuts, deregulation, and incentives for manufacturing investment, lifting sectors closely tied to the economic cycle.
However, economic growth does not mean stocks will necessarily keep rising. Fiscal expansion and investment demand could push up inflation and interest rates, increase companies’ financing costs, and compress equity valuations.
For companies in the financial, industrial, and AI sectors, whether stronger earnings from economic growth can ultimately offset the impact of higher borrowing costs will be key to determining stock performance. Thus, while a Republican sweep could extend policy tailwinds for the AI industry and boost financial and industrial stocks, rising risks from fiscal deficits, inflation, and interest rates could limit the upside for equities.
For markets, the central question in this scenario is whether policies that support economic growth can translate into higher corporate earnings, and whether that growth can offset the pressure from higher financing costs.