Can the next Congress really address Americans’ kitchen-table concerns?

ANTHONY SAGLIMBENE – CHIEF MARKET STRATEGIST, AMERIPRISE FINANCIAL

WEEKLY MARKET PERSPECTIVES —  November 2, 2026

Can the next Congress really address Americans’ kitchen-table concerns?

After what has seemed like an endless midterm election cycle in recent months, voters finally head to the polls on Tuesday a) to pick their next leaders, but b) to finally wrestle back from politicians and donors their familiar pharmaceutical, car, beer, and gambling television ads. According to Bloomberg and AdImpact, the 2026 mid-term elections are on track to be the most expensive in U.S. history, with candidates, parties, and outside groups collectively spending at a record pace across television, digital, and online platforms. All that ad spending, along with voters’ cost-of-living concerns this election cycle, has led to more than 53 million early ballots being cast as of November 1, according to the University of Florida Election Lab, a pace that has already surpassed the 2022 midterm of roughly 46 million early ballots.

While investors have benefited from the S&P 500 Index being up roughly +11% this year (on pace for the fourth year of double-digit annual returns), household budgets are being squeezed by oil above $100 per barrel and a 10-year Treasury yield near 5.0%. Simply, rising costs for consumers and businesses, which have been front and center for voters this election cycle, are unlikely to fade, in our view, no matter how the midterm results play out this week.

Most Americans want to see the cost of their essentials go down or at least stop rising faster than their paychecks. That starts with the bills households can't avoid. Gasoline, diesel, and heating costs have remained elevated since the U.S./Iran conflict pushed oil higher in late February. Grocery bills have followed, since higher fuel costs travel with every truckload of food. Notably, housing has become harder to afford as mortgage rates have climbed. And healthcare, insurance, and electricity remain persistent pressure points, with data-center demand adding a new worry about utility rates in some communities.

Importantly, we believe price increases have compounded over several years, sapping consumer sentiment and adding to voter frustration. For example, consumer prices are still running +3.7% above a year ago, on top of several years of elevated inflation, and those higher prices don't reverse when inflation cools. Most of the purchases outlined above are also necessities, including home or rent. Though a family can delay buying a new car, they can’t avoid paying their electric bill or buying groceries. Importantly, higher interest rates have also raised the cost of carrying a mortgage, a car loan, or a credit card balance. In our view, that combination explains why many voters feel stretched today, even with unemployment low, and especially if they haven’t benefited from rising asset values in stocks and homes.

So, can Washington really address what voters are most concerned about at the moment? That is, higher prices. Our advice: Don’t hold your breath. Under divided government (the most likely outcome), we likely expect lawmakers to spend much of 2027 negotiating government funding and the debt limit, leaving little room for broad relief on voters' top concerns. For investors, the more important signals will come from those agreements and from how the White House responds as passing legislation gets more difficult in divided government.

Start with housing. The average 30-year fixed mortgage rate sits at 7.28% today, up from roughly 6.3% a year ago. On a $400,000 loan with 20% down, that adds roughly $200 to the monthly payment before property taxes, insurance, and maintenance (which, by the way, have also increased over the years). Lasting relief requires lower financing costs and more homes for sale. It’s unlikely Congress can deliver on these fronts directly or quickly.

Of course, higher energy prices are a main source of voter strain this year. Oil above $100 per barrel raises what households pay at the pump and what businesses pay to make and move goods across the country. Oxford Economics expects high diesel prices could further feed into food and other prices more materially in 2027 if oil prices remain elevated. And as most investors understand, the path forward for the U.S./Iran conflict will likely matter more for oil prices than any change in congressional control.

Bottom line: Voters want lower costs, but the biggest drivers, including energy, food, mortgage rates, oil prices, and housing supply, sit largely outside Congress's immediate reach. Thus, we believe the thrust of voters’ cost-of-living concerns, which may drive a divided government over the next two years, is unlikely to be resolved by a change in Congressional leadership alone.

And on the monetary front, don't expect the Federal Reserve to step in quickly, either. Last week, policymakers held rates steady at 3.75%–4.00%, as expected. The Fed described economic growth as “strong” and inflation as “elevated”. In our view, there's little reason to expect lower borrowing costs in the near-to-intermediate-term, given current economic fundamentals.

We believe these dynamics matter for stock prices as well. The S&P 500 trades at roughly 18.5x the profits companies are expected to earn over the next year, a price that already assumes healthy growth ahead. Meanwhile, a risk-free 10-year Treasury bond pays close to 5.0% a year. When a government-backed investment pays that much, investors have less patience for companies that miss expectations (see last week’s Mag Seven reactions as an example). Further, consumer-facing stocks have already seen pockets of pressure this year due to the cost-of-living dynamics noted above and changes in spending behavior. In our view, companies will need to deliver the profit growth already built into their share prices next year, a requirement that also lies outside the control of the next Congress.

Turning to the election itself, we believe a result this week that leads to Democrats taking control of the House while Republicans maintain control of the Senate would likely prompt a limited initial market reaction, as this outcome is largely priced into current expectations. This result could lead to an increase in investigations, funding debates, and little, if any, new legislation. Oxford Economics assumes Congress will handle funding and the debt limit without new economic support, aside from possibly extending temporary tax provisions set to expire after 2028. As such, that leaves little reason to expect a broad household-relief package in 2027 that addresses voters’ main cost-of-living concerns. And under this Washington makeup, the White House's response and congressional leaders' first priorities could give investors a good sense of what the next two years may look like.

Importantly, the test for investors is whether lawmakers meet their budget deadlines over the next two years without a prolonged shutdown or debt-limit scare. Narrow majorities in the House and Senate make this test harder, and history is littered with recent instances in which lawmakers have found it very difficult to meet this simple expectation. And with Congress divided, the White House could lean more heavily on tariffs, export controls, agency actions, and international issues that don't require new legislation, keeping policy risk elevated for businesses over the next two years.

On the other hand, a Democratic sweep of both the House and Senate (which prediction odds suggest is a possibility) would give Congress more leverage over the White House and more room for coordinated investigations and pressure tactics (e.g., end the conflict with Iran and ease sanctions and tariffs on key trading partners). Further, a Senate majority would allow Democrats to slow or block White House nominees, making it harder for President Trump to install preferred officials at federal agencies.

That said, the President retains his veto power on any legislation, and overriding it requires a two-thirds vote in each chamber, a hurdle the next Congress is unlikely to overcome, in our view. Notably, calls for higher corporate taxes, restored energy subsidies, or sweeping technology rules could grow louder in a Democrat controlled Congress. But any proposals drafted into legislation would still need the President's signature. Thus, investors should focus on measures with a credible path to becoming law under this scenario and discount rhetoric or legislation that are unlikely to alter the status quo. And in the possibility that bipartisan deals are struck in any combination of Congress over the next two years, investors will quickly look to assess if those agreements improve or worsen America’s fiscal standing, which is top-of-mind at the moment and unlikely to change, in our view.

And we would be remiss if we didn’t point out that an unexpected Republican hold of both chambers could reopen the path to more tax and spending changes through budget reconciliation, which lets qualifying measures pass the Senate with a simple majority. Nevertheless, investors would likely weigh any potential boost to corporate earnings or consumer spending from possible stimulus against the additional borrowing required to fund it.

At the end of the day, government gridlock over the next two years, regardless of Congress's exact composition, should slow “new” fiscal spending, in our view. In a small way, the market may look at that as a positive. Maybe, on the margins, it helps keep longer-term Treasury yields in check, at least aside from other factors currently driving rates. However, that composition is unlikely to help shrink the $40 trillion in outstanding U.S. government debt, meaningfully reduce deficit spending, alter the more than $1 trillion in U.S. annual interest expense, or provide a framework for building a more responsible fiscal roadmap. Admittedly, these might not be items for the next Congress to solve, but at some point, investors will expect our elected officials from all sides of the aisle to lead with greater fiscal discipline.

None of this means investors should brace for the worst. In fact, with the election noise soon set to clear, the market can more fully focus on the drivers that matter most for stocks (i.e., growth, profits, and the outlook ahead). Importantly, the U.S. economy continues to expand (up an impressive +3.4% in Q3), with heavy AI investment and a broadening recovery in industrial activity helping offset a softer consumer. Corporate profits are growing at an exceptional clip this year (up roughly +30% year-over-year in Q3) and expected to grow by double digits again next year. In our view, these forces will matter far more for stock prices over the next 12 months than what party holds the gavel in either chamber.

History also supports maintaining a constructive approach post-election. Between 1950 and 2022, the S&P 500 gained an average of +15.4% in the 12 months following a midterm election, according to Bloomberg and S&P Dow Jones Indices. Notably, in the eight midterms when the president's party lost control of at least one chamber, the most likely outcome this week, the Index averaged an almost +13% gain over the next year and finished higher every time, per Bloomberg. Granted, that's a small sample size, and each period carried its own market and economic dynamics. Nevertheless, once election uncertainty clears, investors have historically turned their attention back to the fundamentals that drive asset prices. In our view, investors who keep their politics largely separate from their investments tend to outperform those who let their party affiliation influence their portfolio and allocation decisions.

Bottom line: In part, Tuesday's results will likely decide who leads 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, once the votes are fully counted and investors know what Washington's composition will look like over the next couple of years, the focus will likely shift back to fundamentals. Historically, that shift has usually been good news for stocks in the year ahead.

The week ahead:

• The October employment report on Friday headlines a busy data week, with consensus looking for +40,000 payrolls and the unemployment rate to hold steady at 4.2%. ISM Manufacturing is out on Monday, JOLTS hits Tuesday, and ISM Services and ADP private payrolls are out on Wednesday.
• The U.S. Treasury will also release its quarterly refunding announcement on Wednesday.
• Earnings remain heavy, with about 140 S&P 500 companies reporting, including Apple, Palantir, Qualcomm, McDonald's, Uber, Booking Holdings, Amgen, and Pfizer.

These figures are shown for illustrative purposes only and are not guaranteed. They do not reflect taxes or investment/product fees or expenses, which would reduce the figures shown here. An index is a statistical composite that is not managed. It is not possible to invest directly in an index. Past performance is not a guarantee of future results.