#美联储继续按兵不动 With the midterm elections approaching, what lies ahead for U.S. stocks?
1. Where does the U.S. midterm election race currently stand: As the November 3 election day approaches, market attention to the midterms is increasing. As of October 28, 2026, Bloomberg market pricing shows that the probability of Republicans retaining control of the House has fallen to 8%, while the probability of their retaining control of the Senate has also declined recently to 33%. The probability of Democrats controlling both chambers is as high as 64%, with expectations of a Democratic victory rising and political pressure on Republicans increasing significantly.
2. How might U.S. policy evolve under different election outcomes:
(1) If Democrats control both chambers of Congress: The Trump administration’s legislative leeway to cut taxes and ease regulation would be limited, while the risk of fiscal budget battles would rise; Democrats could bolster Federal Reserve independence through congressional oversight and scrutiny of Fed appointments; AI data center regulation could tighten, potentially disrupting the pace of capital expenditure, but construction and site selection are mainly determined by state and local governments, so the long-term direction of AI infrastructure investment is unlikely to change;
(2) If Congress is divided: Checks and balances between the parties would make major fiscal and regulatory changes difficult, supporting continuity in existing policies; Republicans could still maintain influence over Fed appointments; Democrats could still pressure regulators over AI data centers; (3) If Republicans control both chambers: The Trump administration would face less resistance in pursuing tax cuts, easing tech regulation, and expanding traditional energy supply, with greater scope for policy coordination on Fed appointments; unified Republican control of Congress would make it easier to streamline data center approvals and build out supporting energy infrastructure, further supporting the AI supply chain currently driven by capital expenditure from leading U.S. tech companies.
3. What impact will the midterms have on major asset classes: (1) If Democrats control both the House and Senate: Constraints on fiscal expansion, together with tighter AI regulation, could weigh on earnings expectations and intensify divergence within the market; expectations for growth, inflation, and interest rates could edge lower, the dollar is expected to trade with a weaker bias, and Treasury yields could fall, supporting U.S. equity valuations; gold would benefit from lower real interest rates, a weaker dollar, and safe-haven demand amid political disputes;
(2) If Congress is divided: Checks and balances between the parties would limit major new policy measures, and markets would be more inclined to price in policy gridlock and narrowing macroeconomic volatility; the dollar is expected to trade with a weaker bias and Treasury yields to fall, while U.S. stocks would benefit from reduced tail risks around policy and lower interest rates, leaving the overall outlook neutral to bullish, with growth stocks relatively favored; however, AI regulatory pressure remains a concern, and areas more dependent on new computing capacity investment could still face short-term headwinds; gold would also be supported by lower real interest rates and safe-haven demand;
(3) If Republicans retain control of both chambers: Tax and fiscal policies would continue, with fewer obstacles to expansion, potentially lifting expectations for growth, inflation, the fiscal deficit, and Treasury supply; the dollar would be supported by interest rate and growth advantages and strengthen in the short term, while long-term Treasury yields would face significant upward pressure; U.S. stocks would be supported in the short term by earnings and policy expectations, but rising long-term yields could weigh on valuations over the medium term; gold could decline first and then rebound, facing short-term pressure from a stronger dollar and rising real interest rates, but gaining medium-term support from concerns about the fiscal deficit, inflation, and debt sustainability
Historically, the sharp October rally has largely reflected the unwinding of September’s risk aversion, whereas the S&P 500 fell only 0.45% in September this year, outperforming historical levels; therefore, pressure on U.S. stocks could reemerge after the midterm elections: (1) The U.S. fiscal deficit remains high, and ongoing financing needs could weigh on long-term interest rates and U.S. equity valuations;
(2) After temporary funding expires, the risk of a government shutdown and fiscal negotiations could rise again if the new fiscal year budget and appropriations are still not finalized;
(3) After the midterm elections, the situation in the Middle East could still escalate again.
Considering the correlation between industry performance since the start of 2026 and the probability of either party controlling Congress, markets have already priced in some differences across election outcomes: (1) If Democrats control both chambers: [Clean Energy] and [some defensive sectors] could outperform relatively, but tighter tech regulation and higher data center construction costs could disrupt the AI supply chain; (2) If Congress is divided: Existing policies are more likely to continue, and tech performance may depend more on corporate earnings and capital expenditure fundamentals; lower interest rates would benefit [technology growth stocks] through higher valuations, but AI regulatory pressure remains a concern, and areas more dependent on new computing capacity investment could still face short-term headwinds;