What the 2026 midterm results mean for your investments

Anthony Saglimbene, Chief Market Strategist – Ameriprise Financial

Nov. 9, 2026

This article is intended to provide perspective on how election outcomes may impact financial markets, the economy and investments. These insights are not political statements from Ameriprise Financial, nor an endorsement of a particular party or political agenda.

The 2026 midterm elections brought a broad shift toward Democrats, who won control of Congress while also making gains in key state and local races across the country. Affordability and the economy were central issues for voters, with concerns about the cost of everyday essentials helping shape races up and down the ballot.

As Democrats turn their attention to these concerns, the new balance in power could bring changes at both the federal and state levels, from priorities around taxes and government spending to trade, regulation and other policies that affect consumers and businesses. For investors, those shifts could have different implications across industries and market sectors.

Still, politics is only one part of the investment picture. Economic growth, corporate earnings and interest rates are likely to remain important forces shaping markets. Here’s what the midterm election results could mean for your investments and what to watch in the months ahead.

Where the election could matter most for sectors

Over the next two years, the election's biggest effects on markets are likely to show up at the sector level. With President Trump keeping his veto power, Democrats are unlikely to reverse his agenda through new laws.

Instead, their influence will come through spending bills, oversight and the power to slow nominees at key regulators. Here are a few sectors and industries that could see impacts:

• Hospitals and Medicaid insurers could see upside on the idea that Democrats could delay scheduled Medicaid cuts.
• Renewable energy could gain from potential congressional pushback on the administration's actions against the solar and clean energy industries.
• Defense stocks could face pressure from tighter scrutiny of government spending with Democrats in control of Congress.
• Cryptocurrency may face more uncertainty, as stalled legislation to set clearer rules for the industry now appears unlikely to advance over the next two years.
• Tech and AI stocks could face increased regulatory scrutiny, particularly around AI safety and approvals for data center development.
• Banks could face more oversight and populist proposals, though regulators are likely to keep easing capital rules.
• Energy and trade-sensitive sectors will likely remain tied to the White House's decisions on Iran and tariffs, which Congress can do little to change.

AI investment faces decisions beyond Washington

Campaign rhetoric suggests the political tone around AI is shifting, which could have significant implications for AI-related stocks. That concern helped drive a sharp pullback in some major indices following the election, as investors weighed the possibility that a Democratic-led Congress and newly elected state officials could slow data center construction and AI spending.

Here’s how policy decisions at the federal, state and local levels could shape the outlook for AI investment:

• More officials could shape AI investment decisions. At the highest level, we believe the Democratic sweep of Congress and wins in key gubernatorial races will likely broaden the pool of officials who will influence AI investment over the next two years. For example, congressional hearings could increase scrutiny of AI safety and technology companies’ relationships with the White House. Further, Democratic governors in key states like Texas, utility regulators and local officials will likely influence where data centers are approved and how infrastructure costs are allocated.
• Policy uncertainty could delay AI projects and increase costs. Specifically, the changing makeup of Washington and state and local governments raises uncertainty around permitting, electricity costs and construction timelines. In our view, AI projects still awaiting approval or construction appear particularly exposed. Delays could defer equipment orders and customer revenue while extending financing costs.
• Strong AI demand may not prevent shifts in spending and revenue. Yes, demand for AI computing can remain strong through these changes. However, investors must now assess how much revenue arrives, when it arrives and what it costs to deliver that growth. Slower spending could support near-term cash flow for large cloud companies while reducing expected revenue for their suppliers. Over the coming months and quarters, the critical test is whether policy concerns translate into revised project schedules, spending plans and earnings expectations.
• Financial strength and secured infrastructure deals become even more critical. This shift in political tone around AI arrives as investors are already closely scrutinizing how companies will fund the AI buildout and how much free cash flow, debt and new equity issuance it consumes. Given current conditions, strong AI demand may provide less support for share prices if financing costs rise or returns take longer to materialize, particularly in a more challenging regulatory environment. Thus, we believe companies with strong balance sheets, secured power arrangements and visible customer demand should be better positioned to absorb higher infrastructure costs should Democrats turn a more watchful eye on the AI infrastructure buildout.

Legislative gridlock could help keep Treasury yields in check

With Democrats controlling Congress and President Trump retaining veto power, we expect little major legislation over the next two years, though Democrats could use investigations, spending negotiations and control over nominees to seek health care concessions and tighter administrative spending controls.

At the end of the day, we believe legislative gridlock over the next two years should slow new fiscal spending, potentially helping keep longer-term Treasury yields in check at the margin. However, a divided government is unlikely to meaningfully reduce existing deficits or the government’s interest burden, which is now over $1 trillion annually. Any bipartisan agreement will therefore face scrutiny over its borrowing requirements. Investors should understand that persistent deficit spending (likely over the next two years) can keep pressure on bond yields even when Washington passes little to no new legislation.

Tariffs and energy prices remain key risks to inflation

As passing legislation becomes more difficult in Washington, we expect the White House to maintain a heavy reliance on executive orders, tariffs, export controls and agency actions through the rest of President Trump’s term. As such, congressional oversight will likely dramatically increase, even though the President retains considerable discretion over trade and foreign policy. Investors should resist assuming election results will resolve uncertainty surrounding Iran, oil, tariffs and trade policies.

That said, a diplomatic agreement that lowers energy costs could ease pressure on household budgets and corporate margins, while additional tariffs could undermine the affordability improvements voters demanded. In our view, White House decisions in these areas could influence inflation and bond yields sooner than most legislation emerging from Congress.

Notably, higher borrowing costs also raise the standard companies must meet when deploying new capital. And when high-quality bonds offer attractive income (as they do today), investors have less patience for businesses that miss profit expectations. Thus, companies will still need to deliver on the growth expectations embedded in their share prices, a requirement outside the next Congress’s control and, to some extent, influenced by White House decisions on energy, trade and foreign policy.

The election could clear the way for investors to refocus on fundamentals

The S&P 500 Index entered the election with a double-digit year-to-date gain, yet it had declined over the preceding three months. In our view, markets had already experienced some of the weaknesses and elevated uncertainty historically associated with the midterm period. Given that stocks have historically performed well post-election, we believe that strengthens the case that markets can benefit now that election uncertainty has passed, especially as stocks enter a seasonally favorable backdrop through year-end.

Case in point: between 1950 and 2022, the S&P 500 Index gained an average of +15.4% in the 12 months following midterms, according to Bloomberg and S&P Dow Jones Indices. Further, in the eight elections when the president’s party lost at least one chamber, the Index averaged almost +13% over the following year and finished higher each time. Despite the immediate market reaction this year, it’s possible that pattern may still hold in the months ahead.

Bottom line

Democrats will now lead Washington's cost-of-living debate heading into the 2028 campaign. Yet the forces that drive stocks over time, including economic growth, corporate profits and interest rates, will likely be shaped by dynamics outside Washington next year.

With the economy expanding and companies continuing to grow profits, we believe the post-election backdrop gives investors more reason for optimism than this campaign season's tone suggests.

That said, the tone around AI is shifting, and we see this, combined with higher interest rates, as the larger threats to market sentiment and fundamentals heading into next year. Nevertheless, now that Washington's composition is locked in over the next couple of years, the focus will likely shift back to fundamentals. Historically, that shift has been good news for stocks in the year ahead.

Focus on the fundamentals, not the political headlines

If you’re concerned about how the shifting political landscape could affect your investments, connect with your Ameriprise financial advisor. They can help you make sense of policy changes and market developments while keeping your financial strategy focused on your long-term goals.